Chapter 5 : Income Protection

Question 1

What parts of IP can be confusing?

Answer 1

1. Definition of incapacity and measures of fitness to work are subjective
2. Payouts are not always linked to current salary
3. Benefit limits
4. Underwriting is complex
5. There may be exclusions

Question 2

What are the risks to an insurer from IP Products?

Answer 2

1. Claim inception and termination rates including anti-selection
2. Selective and normal withdrawals
3. Mortality, expenses and investment

Capital requirement will normally be low