Guide to Covid-19 and protection

Insurance cover in the world of Covid

Protection policies can sometimes be a tough sell, as customers have to imagine illness, death and potential financial disaster, which they are understandably reluctant to do.

But when the coronavirus hit, threatening health and financial stability, interest in these policies surged. Research published by Zurich in February this year revealed the pandemic had driven demand for financial advice on income protection and critical illness up by a third.

As Peter Hamilton, head of market engagement at Zurich, says: “One thing the pandemic has highlighted – if we didn’t know already – is how life can change suddenly.”

Managing risk to health and income has clearly risen up the agenda for many people. But policyholders must also manage exposure to risk; changing circumstances can result in providers withdrawing or changing some products.

The Financial Conduct Authority makes clear in its coronavirus guidance that it cannot prevent businesses from doing so, but it also stipulates that they must consider the needs of their customers carefully.

So, how has the industry managed the challenges and supported its customers?

“We aim to provide protection to as many people as possible; pandemic or no pandemic,” says Helen Dick, senior manager, underwriting and claims strategy at Scottish Widows.

“We find ourselves in very difficult times so it’s more important than ever that we are here to provide access to insurance and support our customers and their families should the worst happen.”

Royal London has taken steps to support customers in need of some financial leeway, protection specialist Jennifer Gilchrist reports. “We recognise the impact Covid-19 is having on our customers, with some struggling financially.

“We want to do everything we can to help customers keep their cover during this time of uncertainty and in the future. If a customer has had a change in personal circumstances or is facing financial difficulties and unable to pay their monthly premiums in the short term, they can contact us to discuss the options we can offer.”

At LV, speeding up internal processes has been key in providing support to customers, as Justin Harper, head of protection marketing, explains: “We’re seeking more information directly from applicants – simply texting or talking to them and asking them for their own ‘evidence’, rather than deferring to traditional routes such as GP reports. Financial, practical and emotional support have risen in importance, and not just at point of claim.

“And we’re already incorporating many of our lessons and changes arising from Covid within our longer-term ways of working and proposition design.”

There have been some pandemic-related changes to policies, however, as Paul Yates, product strategy director at adviser technology provider iPipeline, observes: “We initially saw some product restrictions, such as removal of short deferred periods for income protection by almost all providers.”

But the situation is improving, as Yates notes: “We have seen shorter-term deferred periods return, thankfully, as this is a key factor for many people who have little or no financial safety net.” 

Summing up the efforts made by the industry, Jo Scott, policy adviser, health and protection at the Association of British Insurers, says: "The insurance industry has worked hard throughout the pandemic to support customers, ensure the claims process continues to run smoothly and respond to the challenges of the crisis."

For protection insurers this has also meant supporting the NHS by finding alternative routes to source medical evidence for a claim, being flexible with customers experiencing financial hardship and prioritising claims from vulnerable customers.

“While no amount of money can ever replace a life, insurers paid out £202m last year to support the families of people who tragically died due to Covid-19.”

However, some customers perceive things differently. In March, pension, investment and insurance specialist Drewberry published the results of its 2021 pandemic health and protection survey of 1,000 working adults. According to the findings, 44 per cent said that insurers have paid out fewer than half of Covid-related life insurance claims. 

More support to more customers

Can customers expect the industry’s coronavirus-related support to carry on when the pandemic fades – and what will the protection landscape look like after Covid?

Sue Helmont, marketing director at AIG Life, says: “The pandemic saw an increase in providers launching health and wellbeing value-added services. The most popular element of these services has been remote GP consultations, and I predict that demand will continue to climb.”

This could have an impact on policy design, as Andrew Wibberley, co-chair of the Income Protection Task Force, observes: “We’ve seen significantly increased use of many of the value-added benefits in protection policies, including virtual GP consultations and mental-health support, and anticipate this continuing, potentially being even more front and centre of the protection proposition.”

He adds: “With the protection world having demonstrated that in the worst of our times we pay claims and support families, the hope is that we are able to help more people get that protection in the future.

“If we cannot get the message of protection in general, and income protection specifically, through to people in the months and years ahead, then we will all have failed in helping build a more resilient society to support us when the next unexpected event occurs.”

Adam Shipton, head of national partnerships at British Friendly, takes a similar view: “The next big opportunity for the industry is to build on the positive steps taken to date and maximise the increased consumer awareness of the need of protection.”

Protecting the country's workforce

The country’s workforce has experienced much upheaval and uncertainty as a result of the pandemic; the introduction of working from home, communicating with colleagues remotely and job insecurity have taken their toll.    

The pandemic has therefore not just affected physical health, it has also had an impact on the mental health and wellbeing of the country’s workforce.

The UK's Health and Safety Executive's annual statistics report revealed that stress, depression or anxiety accounted for more than half (55 per cent) of all working days lost in 2019-20. 

Coinciding with Mental Health Awareness Week in early May, Zurich published data that revealed the stark results for employees of living through the past year’s challenges.

More than a quarter (28 per cent) of the company’s new group income protection claims last year were for mental ill-health. This meant it was the second most common reason for people seeking support – the most common reason was cancer. 

However, many companies have risen to the challenge of supporting employees through unprecedented circumstances and have sought to provide support, or add to existing support.

Tom Conner, director at Drewberry, reports a wave of enquiries: “Towards the start of lockdown, we communicated to all our group clients about the additional benefits that their staff could use under their group policy, such as remote GP services. We probably had more engagement from this email than any we'd ever sent before. We had a huge volume of replies asking for more information and about how staff would access these services.

“Unfortunately, we did lose group clients that went out of business. But on the whole, employers tried their best not to cut benefits, especially given the value of these benefits during a pandemic.

“There were plenty of businesses that put off purchasing decisions in harder-hit sectors, but many firms in the online, health care and technology sectors continued to add benefits."

Conner adds: “Our 2021 employee benefits survey found that 47 per cent of small to medium-sized firms added some kind of benefit as a result of the pandemic, such as life or health insurance, but the main area of benefit change was around home-working and flexible working hours.”

The survey, which questioned more than 2,000 SME employees, also found that the benefits most in demand by workers included group life insurance (33 per cent) and group critical illness insurance (30.7 per cent).

Increased awareness

Peter Hamilton, head of market engagement at Zurich, also reports an upswing in interest in group policy benefits: “Covid has had a positive effect on the perceived value of group protection products and the important role they play within the workplace. We have also seen greater engagement with the services we make available to our corporate customers and their employees, because the need for timely, remote wellbeing support has never been more important.”

However, he acknowledges that current circumstances may have had a different impact on some companies. “Employers who don’t currently provide group protection benefits for their employees have not sought to introduce these during Covid, as a result of the challenging economic environment.” 

Lee Lovett, managing director, group protection at AIG Life, also points to the impact Covid has had on protection policies: “There is no doubt that the pandemic has increased awareness of the value of protection insurance, but what’s been interesting to see is the growth, particularly during lockdowns, in the use of the additional services that come with it – such as online GP services and mental health support.

“Group scheme members and their families make up two-thirds of the users of our telehealth service, which suggests employers have been proactively telling employees to go ahead and make the most of the services they can access through insurance they already have.

“That said, the group protection market showed only modest growth of approximately 5 per cent during 2020. Hopefully, with a fast-recovering economy in 2021 and increased awareness, the group protection industry will see higher growth.”

Some providers have tailored their group protection policies to adapt to the evolving Covid landscape, as Colin Fitzgerald, distribution director, group protection at Legal & General, explains: “Legal & General was the first to introduce 'long Covid' support programmes as part of all of our existing and new group income protection policies, providing tailored support after an absence of four to six weeks.”

Fitzgerald has also observed increased activity from some employers looking to support their workforce: “The pandemic and ensuing economic uncertainty have seen employers accelerate their wellbeing goals; maximising existing benefits and minimising costs is now ‘mission critical’. But, at the same time, they also face increasing expectations from employees.

“The pandemic has raised awareness of the importance of salary protection thanks to furlough, yet only around 12 per cent of the UK workforce is covered by group income protection. What’s more, benefit flexibility is required to meet the increasingly diverse needs of workforces. In short, employers have a number of challenges.”

Adam Shipton, head of national partnerships at British Friendly, notes the need for further awareness of protection products: “Employers within financial services and certainly within the protection space will already understand the value of offering access to products, including group income protection, private medical insurance and access to other services that support the financial, mental and physical wellbeing of their people.

"Where employers across other industries may not have seen a large impact of long-term illness or disruption to their businesses before, the pandemic has hopefully brought this to the forefront of their agendas."