IP must be simpler and more flexible

26 July 2010

Intermediaries have a responsibility to their clients as we move into a period of economic instability.

While the latest unemployment figures show a small fall of 0.1% they can be expected to rocket when the public sector jobs cull kicks in.

Worryingly, the Chartered Institute of Personnel and Development warns that the UK only needs to see slightly weaker economic growth than the current forecast to seriously reduce job prospects until 2015.

It predicts the economy will have to grow by at least 2.5% a year for the next five years to create enough jobs to compensate for the effect of public spending cuts.

Payment protection insurance has typically been recommended to cover payments on outstanding loans including mortgages. But this can be a complicated financial product and cover is limited to the loan in question.

So some brokers have moved away from recommending this cover. That does not preclude the need for income protection but it does suggest that a radical review of the product may be needed.

We must move away from a product that is complex and inflexible to one that protects the lifestyles of policyholders and their families against a temporary loss of income.

A new IP product would allow policyholders to direct payments where they feel they do most good, including household bills.

The policy also needs to be flexible enough to be sold to clients who do not have a mortgage or existing credit agreements. It’s about giving customers choice.

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