The Income Protection Definition Debate

AngryPolicyholder

Over the past three years I have fought Scottish Provident one of the UK's biggest insurance companies because they refused to honor my income protection insurance claim. I was in hospital for three months so I was unable to do any job but Scot Prov's argument was my policy was based on being unable to do a set list of 6 'work tasks' and had nothing to do with my inability to do my job.

The set 'tasks' were simple none job related things like being able to walk 200m, hold a pen in either hand, lift a 1kg weight, speak, hear etc all with the use of aids or assistance by others. To get paid out I had to do at least 2 of these 'tasks'. As someone that believes in standing up for their rights I fought Scot Prov but still they refused to pay up. Finally I took my case to the FOS who were fantastic and they ordered Scot Prov to look at my case again as the original information was incorrect and the new evidence supported my claim. Scot Prov again refused to honor my claim and it was only after a national newspaper contacted them that they gave me the letter to allow me to go back to the FOS.

Again the FOS ordered Scot Prov to pay up but still they refused and appealed the decision. Third time lucky the FOS again ruled in my favor and with no right of appeal Scot Prov had to payout plus the disgraceful £100 compensation I was awarded. During the past 18 months I have researched these policies and setup a Twitter account to find out if I was alone or was this a major issue within the industry.

Thanks to my campaign our story has been featured a dozen times in national publications and it seems there is a major flaw with these policies. This month the industry came out and launched a major campaign calling for Assisted Daily Living (ADL), Assisted Daily Working (ADW) and Total Permanent Disability (TPD) definitions to be banned as like Brazil did in January 2006. Major insurance companies (friendly societies) have supported the campaign with other companies announcing they are now going to stop selling these policies except for the highest risk jobs which will mean approx 95% of protection policies (only companies who agree they need to stop selling these policies which is currently 1)will be offered with the 'own occupation' definition which is the only form of definition you want. Experts have even said Stephen Hawking would not be deemed disabled enough for a payout which goes to show you have very little chance of getting a payout.

So if you have any form of protection insurance PLEASE, PLEASE check your policy as if its 'task based' you policy is worthless and you are wasting your money. 'OWN OCCUPATION' is the only definition to guarantee a payout.

I hope this stops someone else going through this as I've nearly lost everything. I was off work for nearly a year without any income and having to wait nearly three years was to late to save my finances. The endless fight took its toll on my health and has had devastating consequences. Act before its to late..

OshayAway

More and more PHI providers are offering own occupation definition for more hazardous jobs. A welcome improvement.

It's also important to know that where own occupation is not available, or is too expensive because of the higher likelihood of claim, the variations in the alternative assessment of disability / incapacity should be very closely looked at. This is something that a good broker with a access to plenty of insurers should advise on.

Did you use a broker? Were they tied? What's your occupation?

dunstonh

A lot of people believe income protection is just one type of product. It is not. It is a range of products which include PHI and PPI. PHI also comes in effectively budget, standard and comprehensive cover (for want of a better way of defining it).

Personally, I prefer the old PHI products which were based on assessment of health and not ability to perform tasks. Own occupation is vital if you want decent cover. Also, some of the better plans, especially for higher risk occupations, come from the friendly societies and off the beaten track that you wont find online.

The product type is complicated and could do with some standardisation and maybe a clean definition in quality between the types. Such as making it clear if its a budget or comprehensive version. That would help those that shop as price as their primary driver and not quality.

AngryPolicyholder

I'm a chauffeur so not a very risky job. Scottish Provident argue that its an industry wide issue (misselling of the product?) whilst all leading industry experts say what's the point of selling a policy that will never payout.

The crooks of the issue is these policies are designed to fail and when you buy a product to protect you one would expect in the event you need to claim it will payout. It is also interesting other countries have banned these policies because they hardly ever paid out while in the UK the FSA and ABI are on record at not liking these policies but have failed to act. My case has at least now got the industry working together and insurance companies must be concerned as they have started to change their attitude when offering these useless policies.

Would anyone buy car insurance where of you had an accident you wold only have at best a 4 in 10 chance of a payout? So depending on which side you believe we either have a mass misselling scandal by IFA's who don't know what they are selling or insurance companies knowingly selling a flawed product.

ACG

Your last post is crazy.
Income Protection/PHI is probably the most important insurance policy available to the general population.Your first post backs up my point....

Your plan was based on "tasks".....guess who else also pays out depending on whether you pass/fail tasks....the government. Ive read about people with cancer, dementia etc all being declined for sickness benefit by the government because they can still walk, bend, etc. (The decision may have been overturned on appeak but thats the last thing you want to be doing).

Income Protection whereby its own occupation or even own/suited occupation is a step up, it would and does pay out to people unable to do their own occupation rather than various tasks.

Task based income protection is still useful in the sense that, if you were unable to do any job, would you rather receive £100 a week from the government or 65% of your pre tax income for similar tests?

My opinion is that income protection which is tasks based is probably not worth paying for, not when as dunston says friendly societies will offer own/suited policies.

Im not arguing your first post, i think those tests by the sounds of it are too easy to do, but income protection as a whole is a fantastic product.

AngryPolicyholder

You have got me wrong. Ice been quoted several times in press articles supporting protection policies. If someone can spend £90 per month on Sky it proves how affordable protection insurance can be. IP is a far better product than CI and I would shout from the roof tops that everyone should have one of these policies.

How cantask based policies by useful web they result in mostly failed claims which leads to consumers being let down and a distrust of the insurance industry. All I'm asking for and I'm supported by the industry for these policies to be banned and replaced with own occupation.

dunstonh

I'm a chauffeur so not a very risky job. Scottish Provident argue that its an industry wide issue (misselling of the product?) whilst all leading industry experts say what's the point of selling a policy that will never payout.

There are so few complaint in this area that I doubt it is a widespread issue. I would suggest the problem is that people dont like paying for quality cover and go with cheaper options and then when it comes to having a claim they dont like the fact their budget option doesnt cover them in the same way the quality option does.

It is also interesting other countries have banned these policies because they hardly ever paid out while in the UK the FSA and ABI are on record at not liking these policies but have failed to act.

You have the wrong product. PHI is considered one of the most important policy types going. Please can you point to anything published which backs up your allegation as I cannot believe it and have never seen any hint of that. Now, if you were talking about PPI then I would be with you all the way but not PHI.

Would anyone buy car insurance where of you had an accident you wold only have at best a 4 in 10 chance of a payout?

Yes. The UK consumer would. Quote comparison sites are a prime example of that where people put price as the primary requirement and not quality. Providers have lopped off features and options to lower their price (often offering two versions to cater for both markets) but the cheap budget product outsells the expensive quality one. You also have to look at many industries were cheap and cheerful is the norm. Some quality does exist still which costs more but its more of a niche thing now in most markets.

So depending on which side you believe we either have a mass misselling scandal by IFA's who don't know what they are selling or insurance companies knowingly selling a flawed product.

I havent a clue where you are getting your information from but I suggest a new source as it seems tin foil hat stuff at the moment. The FOS stats show they get so few complaints on PHI that it falls into "other" in their complaints stats in the percentage list. However, they did say they got 720 complaints in 2011 and 760 in 2010. The FOS says that complaints in the PHI, critical illness cover and private medical insurance class: "Complaint numbers in this area may not be as high as they are in relation to some other insurance products."

Personally, I think you are getting PHI mixed up with PPI.

kingstreet

IMHO there is a problem around the definition of disability for income protection and particularly for TPD when "own occupation" isn't an option.

The ADL/ADW/Work Tasks "default" when O/O isn't available has to be very carefully explained to the client so they know exactly what is going to be required before they will be able to claim.

I've just looked back over a Scot Prov SAM plan I wrote a couple of years ago as this was the insurer AP is talking about.

In this instance, I have disability income benefit and waiver of premium on an own occupation basis and total permanent disability on ADWs due to occupation.

This is the suitability section on TPD;-

A one-off payment is paid if the person covered is expected never to be able to work again due to a total, permanent and irreversible disability, for example caused by a serious road accident. The claim will be assessed based on a definition of incapacity of either “Own Occupation” or “Activities of Daily Work”.

Where available, we recommend all our clients take this cover based on an “own occupation” basis. This means the benefit will be paid if you are totally and permanently disabled and unable to perform the essential duties of your own occupation and are not following any other occupation. Essential duties are those that cannot be reasonably omitted without affecting your ability to carry out that occupation.

This definition applies to Sam’s disability income benefit and waiver of premium benefit.

However, the nature of your occupations means the “Own Occupation” definition is not available under the Permanent Total Disability cover. In these circumstances, the “Activities of Daily Work” definition will be offered as an alternative. In this instance, you must suffer mental incapacity or be unable to perform any three activities from a list of seven without the direct assistance of another person but with the use of certain aids, where appropriate. The seven activities are walking, climbing, bending, communicating, eyesight, healthcare and financial independence, with each one having a minimum criteria.

This is backing up the verbal explanation I've given and documented in the factfind notes but it is something that can give rise to confusion.

I don't know the answer to the "work tasks" issue on PHI, other than use a provider like Exeter Family, but I'm beginning to think providers offering only O/O TPD, or defaulting to no TPD, would be a better choice.

The thought of a client not being able to claim when they most need it because I've failed to get them the best possible terms, or failed to fully explain any restrictions, makes me feel sick.

A couple of other posts have appeared while I've been typing this response and I would say this is a more widespread issue around TPD in critical illness cover than it is around PHI/Income Protection.

AngryPolicyholder

Ok responding to dunstonh I'm sorry but my facts are 100% correct and this is a major issue within the industry. Below are just a few quotes from the 15 or so articles wrote about me in the national press:-

an independent financial adviser and founder of money-minder.com, a comparison site, says: “In 12 years of providing independent financial advice I have never found a work-tasks-based income-protection policy to be the most suitable product for a client.” Fears over how these policies are being sold come as the banks prepare to refund customers billions of pounds over the missale of payment protection insurance

Campaigners are calling for a ban on income protection insurance policies that pay out only if a claimant is unable to carry out certain simple daily tasks rather than if the person can’t do his or her job

Almost half of insurance industry insiders and independent financial advisers believe that policies that pay out only to those who are unable to complete set “tasks” or “activities of daily living” should be scrapped, according to a survey by Protection Review, an industry watchdog. Some 80 per cent say that the list of “work tasks” set by insurers should be more realistic.

British Friendly, says that more insurers should be shunning “work tasks” policies. “To us it is simple. As a mutual, our policyholders are our members. If you are a plumber and can’t work as a plumber, we want to pay you. We don’t want to debate whether or not you can climb the stairs. That sort of thing only causes disputes and understandable anger.”

The Ombudsman ordered the insurer to pay out, referring to the supportive comments from the client's doctors.
So COVER asks ‘Surely this is the last nail in the coffin?'

Has the income protection (IP) industry reached tipping point? The validity of list-based occupational definitions for IP, such as work tasks and activities of daily living, has been questioned for many years. But the demand for change is becoming stronger.

The case has highlighted an issue many within the industry know already exists, which is that such policies are arguably unfit for purpose.

views from a range of insurers, reinsurers and intermediaries, asked whether or not the industry should seek to address the on-going problems with ADL & ADW based definitions for IP policies? The results were staggering, with more than 80% of respondents calling for change.

I could fill this post with far more quotes but I think this highlights all my previous points that the industry knows these policy definitions are flawed and need to stop being sold. For someone who is just a policyholder it amazing that my claim and campaign has sent shock waves through the industry and hopefully change is coming.

OshayAway

It was proposed that PPI / MPPI / ASU type policies should not be permitted to describe their cover as "income protection" a term which should rather be reserved for PHI (Permanent Health Insurance).

IMO, it's a great shame that has not as yet been implemented.

AngryPolicyholder

OshayAway is it down to profits rather than looking after policyholders?