4th January 2023

Why does a healthy person need income protection? Employment contracts typically include a fixed number of sick days where the employee continues to get paid when they're unable to work. However, chances are this won't cover long-term sickness that lasts months, which is where insurance can fill the void.

Traditionally, income protection has been bought by working professionals looking to protect their financial security from unexpected health conditions. Among younger demographics, the product has seen less penetration, with customers preferring to insure items such as smartphones and pets.

Yet, the trend is changing. Income protection has an opportunity to obtain a new youthful client base. Oliver Jones, Sales & Distribution Director at National Friendly, explores the drivers behind the widening of the market and the implications it has for the industry.

Income protection is still a foreign concept for many young customers. The notion of paying for protection against the unlikely possibility of getting too sick to work may seem unnecessary. However, the global pandemic has shown us we aren't invincible and has changed this outlook.

Jones says: "I think the pandemic has made people realise that their income is imperative, but it isn't guaranteed because the unexpected does happen. Covid has been a prime example of this, and we've just seen the biggest income protection plan of all time, the Government's furlough scheme, because essentially it was free income protection.  This is a very relevant and timely example, and has demonstrated to people the need to protect their income, because the scheme protected people's income when they needed it the most."

The pandemic finally brought people's health and job security into public discussion as important factors that shouldn't be taken for granted.

According to the Resolution Foundation, 24% of 18-24-year-olds were furloughed. Yet, Jones highlights that traditionally, this demographic is less likely to take out income protection. Insurance is perceived as a cost that is sold to people, rather than being sought after, despite people being familiar of the benefits of furlough.

He says: "Providers and advisers need to help educate the public. Because clients who do have salary protection understand and see the value of it, especially in their time of need."

Added Benefits

The other side of appealing to new customers who seek income protection is value-added services. Jones highlights that not only do these products protect people's income, they offer additional benefits and features that support people in their vulnerable times.

This benefits all parties as it reduces the number of claims insurers receive, as clients are supported throughout their time off aiding their recovery time. Additionally, ancillary services also offer members value. For instance, individuals might find it easier to perceive the value of receiving physiotherapy services that allow them to get back to work and their usual physical activities faster, than understanding the direct compensation they receive.

Jones emphasises that what one person considers valuable is different from another, so introducing more flexible offerings to the market is what will move the industry forward.

Reaching new customers

It's important to grow the market and reach new clients in underserved markets. This is why product design is essential, because we need to create new products that help make protection more accessible.

One area of the market that needs to be targeted is the younger demographics who want some protection but can't afford a full income protection plan. This is why National Friendly launched their Accident Only Income Protection plan. Jones explains that the cover is more affordable, with younger and self-employed demographics seeing its value due to their view that they may be more likely to have an accident than get ill.

Jones explains that the insurance gives people an option to get cover straightaway and doesn't require an extended underwriting process or medical loadings. A fifth of plans sold so far have been to the under 30s, so clearly there is a want for protection from the younger generations.

He concludes: "It's about widening the market and the landscape of how income protection insurance is perceived. I believe that due to the pandemic, all working ages have thought about insurance whereas they've never in the past. That's where the opportunity comes."

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