Articles - Income protection in an uncertain world

There can be little doubt that 2020 is setting out to be a turbulent year in the UK. There is a high degree of business uncertainty as the UK dramatically shifts its economic policy, loosening existing trade ties with the European Union whilst setting up new ones with other large economies such as the US, India, and Japan.

 By Tom Murray, Head of Product Strategy for LifePlus Solutions at Majesco.

 Irrespective of which side of the original argument one was on, the fact remains that the debate is now over, and change is on its way. Even the most vocal proponents of the change, such as the Chancellor Sajid Javid, believe that whilst it is a huge positive for the economy, nevertheless there will be winners and losers, as the business sector adjusts to the new reality.

 Given that the business world will be in a state of flux, it follows that the conditions for ordinary workers will become uncertain. Some industries will decline, others will boom. As they do so, the labour market will have to adjust, and many careers will also be in a state of flux. There will be increases in temporary unemployment as people shift from one industry to another and many may temporarily enter the gig economy to cover the gap.

 In times of uncertainty, protection products come into their own. A shift in the basis of the economy means that many workers will have disruption to their earnings. At times like these, the lure of products that protect against gaps in income grows.

 As a result, it is almost certain that the demand for flexible short-term income protection products will increase. Although these products can be expensive, short-term versions are available and they can be the key to giving workers security in an uncertain world. Workers may move from a full-time job in one industry via a few temporary jobs into a full-time job in another industry altogether. They will need protection levels that vary depending upon the changing risks.

 The question for life providers is whether they have the digital infrastructure ready to support this type of product and deliver it in the manner required by this more mobile and flexible workforce.

 The most attractive products will be those that are flexible enough so that consumers don’t end up either paying for protection that they don’t need or, on the other hand, being exposed to excessive risk levels because their protection level is too low.

 It follows, logically, that consumers need real-time access to their product set to make changes as and when they need to– a type of access that can only be realistically provided by a digital interface to the consumers that empowers them to manage their policies themselves.

 Many of the existing products in the market are insufficiently agile to be altered easily to reflect the more dynamically changing circumstances of the consumer. And even where they are, the flexibility can be constrained by rigid support systems that don’t permit the consumer to rapidly make the changes they need to suit their changing circumstances.

 What’s needed is a shift in thinking by the life companies. Protection products such as income protection need to be designed with flexibility at their core. The supporting solutions need to be designed in the same way and, most importantly, as part of the same process. It’s no use allowing an instant premium decrease if the product doesn’t have an accessible portal to enable the consumer to sign on and implement it immediately.

 So, all product features and supporting processes need to be designed with a digital first approach – an approach that thinks in terms of both the feature and its delivery at the same time in a digital way. Alternatives for consumers who wish to deal with the provider in a more traditional manner can be added on, but the focus has to be on allowing the consumer to go digital as the default position, in order to fit in with the new, more dynamic lifestyles emerging.

 Only by getting the organisation to think in this way will life and pension companies start to deliver the type of protection products and the associated services needed for a more volatile environment.

 Consumers will be attracted towards those life and pension providers that can best suit their needs and fit in with their lifestyle. Those who can’t provide the ‘always-on’ availability and the ability to change the protection levels to suit the changing circumstances of the consumer won’t be in consideration. Providers need to make the internal changes to their product and service design, or they risk ending up with offerings that are complete white elephants in the UK’s new business environment.

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