Insurers limit income protection benefits as coronavirus outbreak drives higher demand
Interest in income protection insurance has increased as individuals look to protect themselves against potential financial losses should the spread of coronavirus impact their income. However, the market is starting to adapt policies to limit the exposure to claims payouts related to the virus.
GlobalData’s 2019 UK Insurance Consumer Survey indicates that concern around job security was one of the top five reasons for purchasing income protection in 2019. 8.8% of respondents stated this was their reason for purchase. A number of measures have been introduced by the UK government to reduce the financial impact of COVID-19 on the workforce. Despite this, there is an upsurge in interest in income protection policies as many individuals and gig workers look to ensure they are able to meet existing financial commitments.
Unlike other markets such as travel and event insurance, income protection will see a smaller number of claims payouts given the deferred period typically being two weeks for exiting policies. As individuals with mild COVID-19 symptoms are expected to be unable to work for two weeks, payouts on claims relating to this illness will be limited. In addition, many providers have also extended the deferred period – which previously stood at two weeks – to four weeks for new policies.
Meanwhile, the sale of income protection policies on UK price comparison sites has been paused, as some providers have stopped selling these products. GlobalData research indicates that a quarter of policyholders visited a price comparison website before purchasing a policy. Given the widespread use of price comparison sites to learn about products and pricing, the removal of policies from these sites will limit consumers’ ability to research policies – and more importantly will reduce the number of purchases made.