Zurich revamps Income Protection: New guarantees, benefits and NHS-friendly diagnostics
Here’s what advisers need to know:
This morning Zurich has announced some significant enhancements to their income protection contract.
There are now two primary offerings, their standard income protection and an enhanced version.
Both contracts now include a maximum benefit guarantee (more about that later), minimum benefit guarantee, return to work package, medical professional sick pay guarantee, sabbatical cover, waiver of premium, maternity, paternity and adoption benefit, own income guarantee and houseperson benefit. The enhanced product can also have trauma, hospital stay and funeral benefits.
Each of the above has the option to add the Zurich Accelerate product and Multi Fracture cover.
Accelerate is a product feature we really like, and our doctors in bestowing their annual award at the Protection Guru Awards last October stated:
“With medical advancements continually reshaping diagnostics treatment and access to services, we are always looking for insurers that rise to meet these changes at a time when the NHS is grappling with unprecedented demand. It is encouraging to see an insurer respond with this policy.”
Frankly, our doctors are not easily pleased so it’s a huge tribute to Zurich that they secured this win.
The standard product allows a single deferred period option with the ability to choose from four, eight, 13, 26, 52 or 104 weeks. Under the enhanced product two deferred periods can be selected to stagger the monthly benefit.
Cover is available up to 65% of the first £60,000 a policyholder earns +45% of any amount over £60,000 subject to a total maximum benefit of £20,000 per month. Notably this can include dividends both to the policyholder and any spouse, civil partner or person that they live with. This is particularly beneficial in situations where company directors are optimising the tax efficiency of their income.
The maximum benefit guarantee means that if there is a difference of 10% or less between the monthly benefit and the maximum amount payable based on an individual’s income the full monthly benefit will be paid.
Equally, if the maximum income benefit can’t apply where the policy benefit is £1,500 or more if gross earnings have fallen below £27,700 they’ll be a guaranteed monthly payment of £1,500.
For monthly benefits of £1,500 or less there is a guaranteed monthly payment of £1,500 less any continuing income. For doctors surgeons and dentists, this £1,500 guarantee increases to £3,000.
The trauma benefit on the enhanced contract will pay £25,000 in the event of blindness, brain injury, deafness, loss of a hand or foot, loss of speech, paralysis of a limb and total permanent loss of the ability to live independently due to the inability to perform at least three of the six activities of daily living .
The hospital stay benefit will provide £150 per night if a policyholder is admitted to hospital as an inpatient for seven consecutive nights or more. Benefit starts from the seventh night and is payable for a maximum of 90 nights over the term of the policy.
The funeral benefit pays £10,000 towards the cost of a funeral in the event of the death of the life insured.
The multi fracture cover is available in £2,000, £4,000 or £6,000 benefits. There have been distinct changes by both Zurich and Vitality in recent weeks so we will return to this subject in a fuller individual analysis soon.
In the first year of any new job, Zurich will now assess a claim based on the contract of employment, rather than historic earnings. Zurich told me this has been part of their claim’s philosophy for some time, but this is now enshrined in the terms and conditions. This is a positive move and there is no doubt that advisers prefer the certainty that terms and conditions give them over claims philosophies, which are only ever at the discretion of an insurer. That may be fine in good markets and whilst an insurer is operating but if things ever go closed book, not that this is really likely with Zurich, will the organisation taking over the book operate a similarly generous claims philosophy?
You don’t have to look too far around the market now to question the future of some players, if a philosophy is generous now, how certain can an adviser be that this would continue?
The key facts document for the revised products runs to 19 pages and to be fair to Zurich is written in clear and concise language. I can’t help thinking that there is a case for our mutual friends in Stratford to revisit their requirements for such documents. How many consumers will actually read all over a 19 page document however well it is written?
The full terms and conditions run to 40 pages but again they are relatively clearly written (as much as you can for a legal contract).
Perhaps that’s a question for a future phase of what I believe it now looks inevitable will be a series of Pure Protection reviews.
So, overall what do we think? The maximum benefit guarantee is an attractive feature and while it is like the approach taken by Aviva, Guardian and LV=, it’s my understanding that only Guardian have also given this a specific name, i.e. “cover uplift.”
Overall, most of these changes primarily bring Zurich in line with the better providers in the market. While there is not a great deal new here they are providing a lot of options, and the ability to bolt on both accelerate and the multi fracture cover is attractive although it brings with it complexities for those of us trying to helping Advisers demonstrate a multiplicity of options in ways that can be clearly understood by consumers.
This will be particularly challenging where a protection process is trying to be contained within mortgage advice, where the time available to explain benefits may be very limited.
It’s great for insurers to innovate and add new options, I hope they will be equally supportive of the costs involved in building new comparison tools for Advisers to reflect all these options.
