Income Protection Awareness Week - Underwriting and Claims

Income Protection Awareness Week

Underwriting and Claims

On the Thursday of Income Protection Awareness Week, a session was held surrounding underwriting and claims. Andrew Wibberley was joined by a number of different people, including David Banks from Legal & General, to talk about the claims process and some of the challenges they’re faced with. They were joined by an assessor at Aviva talking through some of their value added benefits, and there was a Q&A with a number of people including Alan Knowles, MD at Cura and Chair of the PDG.

The discussion started with a case study of a client needing income protection. Essentially if you’re working, you should really look at income protection. You, your body and mind, are the machine that brings the money into your life, you’re precious!

David Banks steered the conversation further by explaining how an income protection claims process is often misunderstood. Many people will categorise insurances all together, though the claim rates and processes for different types of insurance can be completely different. Income protection is from the ‘Protection Insurance’ sector which is far different from the rules and claims statistics that you see in ‘General Insurance’ such as home, travel and motor policies.

When it comes to claiming on an income protection policy, the insurer will require a doctor’s letter and proof of earnings, usually over a 12 month period. Many claims these days can also be submitted online, and with insurers such as Legal & General, each person will have a dedicated claims handler overseeing their claim who would be based in a UK call centre. 

Income protection is designed to payout if you stop receiving your income from work. Any ongoing income that someone receives from their employer, if they have started working reduced hours, can alter what the policy pays out. In this instance the insurer pays the person a portion of their monthly benefit, to top them. Almost like they get paid half from work and the other half from the insurance.

Insurers don’t take into account any other non- income related insurance payouts, statutory sick pay or income that has come from savings or investments, when assessing a claim. A big focus is to support the claimant to stay off work, to still be able to live comfortably and to focus on getting better. The last thing anyone wants is for someone to try and rush themselves back to work before they are ready, meaning that they actually end up off work for far longer.

Andrew touches on a point made by David, in that there is a link between good financial advice and claims being paid. A good presale (researching the best insurer before applying), plenty of information on a person’s circumstances and quality advice, all line up well to create a good basis for a potential claim. Another thing mentioned is that we’re all working in unison, and the sooner an insurer knows about a claim the better.

Aviva shared a presentation with some examples of claims during covid, and how their case managers rehab services work around that. Aviva has a number of things in place for early intervention and rehabilitation for their clients. They recognise that they need to provide to customers who are recovering from covid, and those who just may be anxious about returning to the workplace or the new adjustments to be made. Aviva implemented a number of support packages, such as dedicated case management for their customers for the claims process, which also helps to identify other support needed for customers. 

The Aviva presentation talks through covid-19 syndrome and the physical and mental effects that this can have on a person. Some other support services which they include are signposting to charities, government websites and local support groups. They also provide online training to help manage symptoms, return to work planning, and occasional funding for private treatments where needed. They have an app which all Aviva income protection clients have access to. These are some of the great benefits included in an Aviva income protection policy, and most insurers will also have their own list of added benefits.

Rob at Aviva explains their new Digi App, and then shows a short video from an existing client who had claimed on their policy due to covid. This client had to spend some time in the hospital, after calling Aviva the client knew each of their benefits included in their policy and was then also able to claim a hospital benefit. This allowed her to have more time away from work to recover without the stress of not being able to afford the time off work. She also had rehab sessions over the phone, available as little or often as she wanted. 

Helen Croft from AIG moved on to explain the additional questions which are usually asked for an income protection policy in comparison to a life insurance policy. There are often some additional health questions, as insurers want to know if someone has been absent from work and their likelihood of being absent from work. They also ask questions surrounding income, and proof is required at a point of claim. 

Helen also discussed some common myths such as clients with a mental health condition not being able to have protection in place, and gives some stats and scenarios surrounding this. To hear these please visit their YouTube recording here.

To bring the session to an end, there was a Q&A with Andrew Wibberley, Craig Paterson, Alan Knowles and Anna Rogers.

One of the questions focused on the difference in underwriting between life insurance and income protection. It is explained that an insurer looks at the likelihood of a person being off work rather than there being a death, meaning that what is seen as a minor condition on a life insurance or critical illness cover application, can actually be looked into in more depth for an income protection policy. This is because there can be a much higher chance of a person being off work ill because of an existing condition, rather than it leading to their death. They also look into a person’s occupation more with income protection, as a hazardous occupation will usually make a person have more time off work, and therefore often results in a higher rating or possibly even declined cover.

Alan explains how income protection is very different to what it was 10 years ago, some big factors of this are the underwriting process and that most providers now only offer cover for own occupation. Less financial information is now needed upfront and insurers rely on the honesty of customers to disclose their earnings.

Income protection applications are more complex than a life insurance application, mainly due to there being more options and more providers, and Alan shares his opinion that this allows for great opportunities to challenge insurers more. Alan also went on to explain how income protection is more accessible than critical illness cover, an example of this is type 2 diabetes as there are more insurers who would accept this for income protection than there are for critical illness cover. Cura actually has many clients coming for critical illness cover but after a review of their circumstances by one of our advisers, they end up with an income protection policy that much better  suits their needs.

The importance of highlighting non-disclosure is brought to light. This is where claims can go wrong, and it is an awful situation for everyone involved. Some non-disclosure can be innocent and insurers will do the right thing if that is the case, and will support the claim. But if someone had deliberately left information out of their application, the insurers might well choose not to pay a claim. This is not a decision that insurers take lightly. 

The panel also spoke about how not enough financial advisers do annual reviews with their clients. A client’s income can make a very big difference to the claim, so touching base with your client each year allows you and the client to have a more realistic idea of what a claim may pay. Remember that their salary might have gone up and they are now under-insured, or it might have dropped at which point they are over insured.

Insurers also have a responsibility to produce anniversary statements for this exact reason. Keep an eye out for these, set a reminder of policy anniversary dates and make sure that you are on top of reviewing your client’s cover.