Resilience, reinvention and risk

Income protectionRisk Insurance

16 September 2021

Over the past two years, nobody has been left untouched by COVID-19. Every person and every business have been impacted. It has been a stressful time regardless of who you are, including insurers.

Like many businesses, insurers have been forced to rethink how they conduct business, who they can insure and how they can support their existing clients. And with businesses and employees needing to make some very tough decisions throughout 2020-21 around staffing levels, uncertainty with employment, working from home or even if their business was viable, the insurance community implemented several initiatives in response.

How COVID-19 has impacted income protection insurance

Since COVID-19, insurers have introduced several initiatives to assist their clients. These include:

  • Premium holidays – paying no premiums for a period of time (with the risk of no cover) or paying no premiums but with the opportunity to pay missed premiums in instalments (and maintain cover).

  • Limitations placed on covers offered to new customers such as they type of income protection cover available.

  • Parking of agreed value contracts with only indemnity contracts offered.

  • Parking of some ancillary benefits that could be attached to income protection contracts such as the redundancy benefit.

  • Including how many times a business claimed the wage subsidy into their assessment processes as this was seen as one indicator of long-term viability.

Why insurers have enacted changes to income protection insurance

Fundamentally, it comes back to the core of insurance – providing protection from sudden and unforeseen events.

Mental health is one of the largest outgoings an insurer makes from a claims perspective. And with everything the last two years has delivered, insurers are reporting an increase in mental health claims. Hardly surprising given the increase in stress, anxiety, and depression across the board.

But this means future impacts are no longer sudden or unforeseen. So, insurers have taken a stance on income protection contracts so they can be prudent in their assessment of risk to help ensure they pay claims fairly and protect the existing customer base from potentially large future premium increases.

While clients who had cover prior to COVID-19 will be largely unaffected, customers taking out cover for the first time should be aware there will be limitations on what can be offered to them.

How insurers are assisting income protection claims

Insurers are prepared to spend money up front, where possible, to limit the potential of long-term claims. And it makes sense for them to do this as it helps ensure the client receives treatment as soon as possible to assist them in getting back to work as quickly as possible.

While a client may have a waiting period of anywhere between eight to 13 weeks before they receive a monthly benefit, insurers are prepared to assist with alternative interventions such as immediate access to psychotherapists, psychologists and occupational therapists (which the insurer will pay for) and in some cases accountants and lawyers to assist with cash-flow projections, business restructuring and the like. This support is designed to manage the illness or injury in a way that can help the client return to work earlier than may normally be the case.

Findex Risk Insurance

2020 and 2021 have built resilience and forced us to reinvent and transition to new ways of conducting business. But it’s come with many challenges.

If you have experienced a difficult time or would simply like some advice or guidance on your risk insurance, the Risk Insurance team is here to assist whether you are a current risk client of Findex or not.

Findex is about assisting our clients to have fantastic outcomes and sometimes a fantastic outcome can be as simple as showing we care and can support you during these difficult times.

If you’d like to speak with one of our risk insurance experts to establish income protection cover or review your existing policy,contact ustoday.

Author: Greg Strang

Greg joined Findex after 29 years working in General Insurance (New Zealand, United Kingdom, Papau New Guinea & Solomon Islands) and Personal Risk Insurance with TOWER Health & Life, a large Dunedin based adviser firm, and most recently Lifetime Group. Having worked on both sides of the fence (as an adviser and insurer), Greg clearly understands ...