"We hope that as well as creating a greater awareness, making propositional changes that better serve this group can help address the gap. This could be IP’s coming-of-age moment."
- Jennifer Gilchrist, Protection Specialist at Royal London
Royal London has introduced its new income replacement guarantee which will allow customers to claim up to £1.75k every month – increasing to £3.5k for doctors and surgeons, helping to support changing employment patterns.
Highlighting that the likelihood of financial crisis in the face of ill-health or injury is higher amongst the self-employed since they can’t access employer benefits or Statutory Sick Pay (SSP), Royal London has also improved its flexibility around fixed costs.
Instead of asking to see evidence (such as lease agreements, office rental payments, and phone contracts) over 3 years, Royal London now requires just 12 months of costs. This will benefit those who’re self-employed, especially those who’ve recently made the jump into self-employment who wouldn’t have had sufficient evidence otherwise.
Moreover, Royal London has increased its replacement ratios so claimants can receive a pay out with a higher percentage of their salary. These changes mean policies now pay 65% of the first £60k of a customer’s salary plus 50% of the remaining amount up to £250k as a monthly benefit when the policyholder is unable to work. This means that someone earning £60k can now receive up to £3,250 per month – previously, this amount was £2,875.
“The Pandemic followed swiftly by the Cost-of-Living Crisis has impacted almost everyone’s everyday finances. It has focused people’s minds on the need for longer-term financial resilience and protecting themselves and their loved ones should hard times hit,” said Jennifer Gilchrist, Protection Specialist at Royal London.
She said: “In doing so it’s been a catalyst for people seeing the importance of protecting their income and, as a result, IP sales have seen double-digit growth. This could be IP’s coming-of-age moment.”
Jennifer believes there’s a “completely underserved group with a huge IP gap. The latest figures show over one in ten workers (4.25mn) in the UK are self-employed, yet only a tiny fraction are protecting their income.”
“That’s why it’s so important that we as an industry continue to work together to promote the benefits of IP and why we’ve strengthened our proposition to help broaden the appeal of a solution that has flown under the radar for too long,” she explained.
Commenting on these improvements, Charlotte Rogers, Protection Specialist at Radcliffe & Co Independent Financial Advisers, said: “It’s encouraging to see that Royal London has listened to market feedback, addressing key issues, and introducing changes that will make a real difference.”
“A minimum benefit guarantee of £1.5k (or £3k for doctors and surgeons) has been the limit for many years with most insurers, and the increase is definitely more reflective of the typical amount needed to maintain essential expenditure,” she explained. Increasing the sum assured limits will enable more families to stay financially resilient as living costs continue to rise.
Discussing self-employed customers, Charlotte highlighted that this demographic can be “financially vulnerable without employer sick pay schemes or SSP to fall back on, so making it easier for this group to cover the fixed costs of running their business means they’re able to support themselves and their family with an income more reflective of their typical take home pay before they had to make a claim.”
“I applaud Royal London for making changes that will add value to a customer’s policy and enable more claims to be paid. With IP sales increasing as consumers are becoming more and more reliant on their incomes with ‘emergency savings’ depleting, we need policies that remain fit for purpose and relevant to current needs,” she concluded.
