Income Protection Insurance and Payment Protection Insurance Lessons from Europe

I was recently reading Insurance Insight, an on-line magazine covering the Insurance industry in Europe. Most of it was a bit long and tedious to be honest.

However, did find some quotes from Ole Enevoldsen, who is the business development director and head of underwriting for Continental Europe at Ryan Specialty Group (Europe) among other things. He offers the benefit of a pan European view which includes the UK. In short, I think it it is fair to say this guy has something to say that is worth passing on.

The British Problem

In the UK around 8 percent of people are covered by a protection policy that will pay their bills if they are unable to work due to accident, sickness or unemployment. However, the numbers insured have reduced dramatically in recent times. The majority of the blame for this was laid at the door of the Banks for miss-selling PPI. This in turn gave the rest of the industry selling respectable Mortgage Payment Protection Insurance and Income Protection Insurance a bad name. Even a percentage of these were miss-sold by several High Street brand intermediaries.

As most people know, the provider of finance, or a retailer arranging a finance agreement, can exploit their position as ‘the gatekeeper’ of the money. In the past they could sell payment protection to their customer whether they wanted it or not. Thankfully the FSA has now stamped all over this. But the damage has been done. By the end of 2011, over £1billion has been paid out in compensation by the banks etc, with Lloyds taking the biggest hit of all.

Ole Enevoldsen expresses this with some tact, believing the issue in the UK “primarily come down to PPI being a secondary or tertiary sale, sold on the back of a customer making a retail purchase or arranging finance”. “Historically, the complexity of the product and the high number of intermediaries has often resulted in a lack of transparency and difficulties in ensuring the product is suitable for the customer. Although there are differences in the way PPI is sold in other European countries, these challenges basically remain the same.”

European Experience

“However,” Ole adds “in the current economic environment in Europe there is an increased need for PPI, which in its nature provides a valuable security both to the client and the lender. The development in the past underlines the necessity to manage and control the distribution chain, and shows it is essential not to underestimate the complexity of mass distribution structures.” He goes on to say, “The key is to offer high quality products with a clear focus on the value to the end client and sell these professionally and transparently.”

I could not agree more. For example, i:protect do not sell PPI insurance, our products are the intrinsically customer focused Mortgage Payment Protection Insurance and Lifestyle Protection Insurance. Indeed we do everything we can at i:protect to ensure we treat our customers openly and fairly. People come to i:protect because they have heard of us and select the product that is right for them. It is not forced upon them by i:protect and never will be.

Perhaps in the UK there is a need to learn from this European experience, where, rather than the market shrinking here, it is growing strongly across 19 European countries (up 36% from 2007 say Finacord). Those providers like i:protect, selling Mortgage Payment Protection and Lifestyle Protection (short-term Income Protection) honestly, fairly and above all economically, should see similar growth. The current threat to employment and the growing jobless total, both in mainland Europe and the UK, are an enormous concern. This is strong motivation for British citizens to emulate their European counterparts and to buy the financial protection products they need to pay their bills when they are out of work.

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