Income protection product innovation potentially holds the key to fixing the UK’s broken social care system.
This is according to Johnny Timpson following new PM Andy Burnham reiterating his desire to tackling the country’s social care crisis as he began the second week of his premiership.
Timpson told Health & Protection innovative critical illness and income protection products offer possible solutions.
Estate planning
He added that over the years a number of different solutions have been put forward to address the situation by previous administrations such as using inheritance tax to pay for care or charges being made on estates when people die.
But given the scale of the issue affecting the country, Timpson said product innovation in the protection sector could make a difference.
Income protection
And income protection is a key area for product innovation.
“Certainly for me, the key product that offers potential is income protection insurance,” Timpson continued.
“I take you back to the very origins of income protection insurance back in the mid 18th century.
“Income protection back then paid out a level of income replacement if you were unable to work, but if you didn’t claim on it at all, at the end of the term it would produce a lump sum. That was the Holloway approach to income protection back then.”
Holloway model
Timpson added that he has “long felt” that revisiting that model would make some sense.
“Perhaps having an income protection policy that has got an investment element and at the end of term, if it’s not claimed upon, maybe it funds something like care costs,” he continued.
“If you think back to when the ISA came into existence, there was some talk of a life insurance ISA, that would do that. I think there may be some merit in revisiting that.”
Critical illness
In terms of what else could be done for young people with life limiting conditions, Timpson suggested innovative critical illness products offer a way forward.
“I would argue that for younger people with a life limiting condition that requires care, critical illness insurance has a role to play.
“And we could perhaps look at making critical illness policies go a little beyond where they go now.
“I’m conscious that Vitality’s serious illness cover provides a care element. Maybe there’s more that could be done looking at that approach.”