The latest Swiss Re Term and Health Watch report highlighted an alarming reduction in income protection (IP) policies sold to those with manual occupations or the self-employed over the last year.
Products sold to the self-employed made up just 12.5% of policies purchased in Q3.
As the furlough scheme and Self-Employment Income Support Scheme (SEISS) ended last month, it is clear these workers urgently require protection, which creates an important opportunity for advisers.
How big could this market be?
As of July 2021, there were approximately 4.3m self-employed workers in the UK and 2.9 million individuals receiving a grant under SEISS.
However, research from The Exeter revealed that discussions with self-employed or manual workers accounted for just 43% of advisers’ conversations over the last year, and that only 9% of self-employed workers had taken out an IP policy.
One reason why these groups have historically been under-served is a perception that the underwriting process for them is much more complex; in reality, this is not the case.
While the application questions and underwriting effort are largely the same, the real difference lies in the terms that are ultimately offered to the customer.
For example, an office worker who identifies a pre-existing knee injury on application is less likely to have this impact the terms a provider can offer them than a manual worker with the same injury, who may have an exclusion added for that particular injury.
This is because of the increased risk of the injury reoccurring given their line of work.
The deferred period can also make a difference, with those selecting a longer deferred period, which is common if they receive sick pay from their employer, being less likely to have exclusions added to their policy.
Navigate the application
The key role of advisers here is to help self-employed and manual workers navigate the application journey.
Providing as much information as possible during the application not only allows an underwriter to make a fair assessment of the risks, but it also lessens the likelihood of any issues at claim stage.
We already know the majority of declines for income protection claims are due to misrepresentation on the application form.
An adviser’s in-depth knowledge of waiting periods and exclusions will also be important, to make it clear to their clients how these factors impact the way they can use their policy in the future.
Times have changed, however, and a number of IP policies are now available for these types of workers. As such, advisers now have an opportunity to engage with these underserved groups.
Directing even just a small portion of their time and resource away from traditional audiences and toward manual and self-employed workers could pay dividends.
