IP has arrived at a crossroads

Income protection (IP) is in the news for a number of reasons right now.

Firstly, the recent IP Task Force white paper suggested how the industry can tackle its remaining issues on IP.

Secondly, the dust has started to settle on the Competition Commission's (CC's) paper on Payment Protection Insurance (PPI) and 'short term IP' (although their exact definition of what this is exactly still needs to be clarified).

As a result of the CC ruling three things have started to happen:

Those who sold PPI feel hurt by the CC's ruling, may well have a need for a replacement product, and are trying to figure out where to go next. The pressure is on.

Providers who offer alternative products to PPI are now considering the opportunity they have in front of them, including IP providers. Just how big is this opportunity?

A large tranche of the working population will not be able to buy cover as easily as they could before. The Government will not want that responsibility coming in their direction surely? Interesting angle? Could HM Government do more? Of course they could!

It's a strange world we live in. Those in our industry who favoured IP ahead of PPI have criticised the latter for its poor value and TCF rating for so long that they carried on criticising it long after they'd won the argument.

I think we realise now the time has come to move on. BUT... it's not as black and white as some may think. We should take this opportunity to recognise what was good about PPI. PPI buyers recognised its need (still a key issue for the IP industry) and it was a simple product, simple buying process and easy to sell!

It's good news two providers of IP products - LV= and progress from Royal Liver - have improved their products recently.

LV= has added an element of free critical illness cover to their product, whilst progress from Royal Liver has cleaned up its product by removing things like standard exclusions. Actions speak louder than words!

But, as promising as this is, it might not be enough. In its present state, the IP product and process may not be able to meet the demands of all of those consumers in the UK who would have considered buying PPI in future but who now cannot do so. Especially direct clients.

What if IP can't meet this new opportunity in full? What if we end up with some sort of new 'middle ground' product? Something simple with a short sales process like the one that helped PPI sales for so long? A simpler protection product that covers the loss of income through ill-health for a decent period of time?

Do we need a new income replacement product? Those involved in Real Life Cover would say that we already have one but its early days for that product, and the jury in most cases may be reserving judgement on it until more providers take it up.

So, we have a challenge on our hands. The members of the IP Task Force are discussing this opportunity in depth - as are others. Those who relied on PPI for solving many of their customer's needs are no doubt considering their strategy too. Could a new product be born or will the industry change the current products to cover a customer's needs that used to be met by PPI. What will IP providers do to understand the potential (if there is any) of an PPI replacement market? Is it do or die time for Income Protection?

Wouldn't it be great if you could call 118 118 and get the answers!

Andy Milburn is the head of marketing at Munich Re UK Life