IP better than STIP for advisers: Defaqto

Although growth in the number of Short Term Income Protection (STIP) policies available has outstripped long-term Income Protection (IP) over the last four years, the more bespoke nature of IP offers the most scope for advisers to provide value to clients, according to Defaqto.

However, understanding the product landscape will be critical for advisers to reap the benefits.

Defaqto data shows that the number of STIP products on the market has grown from 30 to 66 since 2009, with the volume of IP policies available having fallen by 20% over the same period – from 67 to 54.

However, this represents a combined growth of 24% in product numbers over the last four years.

To help advisers – and their clients – understand the short and long-term Income Protection universe, Defaqto’s Star Ratings provide an independent assessment of where different policies sit in the market based on the features they offer.

Ben Heffer, insight analyst for life and protection at Defaqto, said: “Traditional income protection sales are being challenged by the rise of STIP, but advisers have a clear advantage in being able to recommend quality long term products to their clients. Simple products, such as those offered by short term income protection insurers, may be easier to buy but advisers can tailor solutions for their clients by drawing on the many features and benefits supplied by the more sophisticated products.

“However, with a large number of short and long-term income protection products now available, it will be necessary for advisers to keep on top of the policy landscape. Our Star Ratings give advisers – and their clients – a high level view of the comprehensiveness of the different policies available.“Advisers should not fear the drive towards simple products in the direct distribution space; anything that helps to change the mind-set of consumers and makes them more disposed towards buying protection has got to be a good thing for the whole industry.”