25 Aug 2020
Posted in Coronavirus
UK insurers need to be transparent with income protection policies as key cover is withdrawn
Insurers in the UK have temporarily withdrawn unemployment cover despite COVID-19 sparking high demand for income protection products as fears of job losses have mounted. This will lead to a sharp fall in premiums. The recent spike in the non-advisor columns means there is a risk of consumers not knowing exactly what they are covered for, according to GlobalData, a leading data and analytics company.
GlobalData anticipates that the individual income protection market will plunge by 26.5% in 2020, with new business premiums set to fall to £48.2m, down from £65.5m in 2019. While demand for unemployment income protection policies soared at the outset of the pandemic, insurers quickly stopped selling these products over an uncertain economy and the prospect of high unemployment.
Beatriz Benito, Senior Insurance Analyst at GlobalData, comments: “It is still possible to purchase income protection that provides long-term accident and sickness cover. Some individuals may buy these policies being unaware that they do not provide cover against job losses – given the strong growth of the unadvised channel in recent years.”
It is estimated that more than half of all income protection products sold provide unemployment cover. According to GlobalData’s 2019 UK Insurance Consumer Survey, 56.1% of consumers purchasing income protection bought policies providing cover against redundancy – either unemployment insurance or comprehensive income protection. The latter, in addition to providing unemployment cover, also provides protection if the policyholder becomes incapacitated to work because of sickness or an accident.
Benito adds: “On a more positive note, GlobalData anticipates that the income protection market will bounce back in 2021 and sustain growth to 2024 as the impact of the pandemic is left behind. COVID-19 will trigger appetite for income protection products in the medium to longer term and raise awareness of the benefits they provide. In addition, individuals will become warier about unprecedented events and will rethink how best to protect themselves against them. These factors are expected to contribute to future growth of the income protection market.”