Income protection sustainable or just more noise?

The future of income protection insurance is likely to come under more scrutiny this year. In the first of a four-part series Jon-Paul Hale takes aim at some claims made by Partners Life.

Wednesday, January 22nd 2020, 10:12AM

by Jon-Paul Hale

Having been in insurance for 20 years this year, I have seen plenty on the income protection front. However, the latest noise about IP sustainability being made in Australia and here, by Naomi Ballantyne from Partners Life, is somewhat concerning.

(Ballantyne's in-depth article featured in ASSET Magazine. To get a copy email your postal address here.)

Back in the early 2000s, we had similar noise about the sustainability of income protection and disability products, yet here we are with drastically better products than we had 20 years ago. Albeit with higher premiums, though incomes and other costs of living have also moved upwards.

While I haven’t had the opportunity to look directly at the research mentioned in the articles on sustainability, I do have extensive knowledge across the product set over the past two decades.

Some points I do agree on:

complications of claims have increased
claim costs and premium pressures have increased.
policy provisions have increased, and improved scope of claims have been added.

The bits I do struggle with seem to miss the point of insurance, I wrote a piece before Christmas, that I didn’t publish, on the Aussie view. I will revisit it with the latest New Zealand comments and follow with this soon. I’ll stick to the New Zealand situation here.

There have been two points raised in Naomi’s discussion that I have trouble with.

The first is the statement about people being more likely to claim when they have income protection.
The second is the length and motivation of claims to be longer.

What I don’t disagree with is that some take the mickey and use the claim as an alternative to fronting up to the reality that work is hard; they shouldn't be a burden on the insurance company. My experience is these people aren’t the majority by any stretch. Those on long-term claim are there because of the need to be; they would instead be working if they could.

Possibly my crucial issue with the research is it reads like much of the recent external industry research, done without the perspective and understanding of life insurance. It is different from every other product on earth. It has a physical aspect, a financial aspect and also a deeply emotional aspect.

This is the first in a series on income protection.

Tags: Income Protection Jon-Paul Hale Opinion