Feature – Individual Income Protection


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Income Protection


Individual The ADL debate More affordable – but is it harder to claim?


While ADLs might appear to be one way of making IP more affordable, some advisers complain that the concept devalues the product and makes it difficult for clients to make successful claims. Emily Borkowska reports.


Activities of daily living (ADLs) have been described by protection advisers as misleading, unfair and failing to do income protection (IP) products justice. Why then, given the industry’s goal to improve its reputation, are they still being used? The biggest criticism of ADLs is that


the claims criteria are so strict that all but the most severely incapacitated individuals will fail them. The requirement for people to complete three out of five or six activities in order to claim means that a broken leg, a ricked back or even blindness might not qualify.


August 2011 www.hi-mag.com “Ultimately, the definition for ADLs could leave many


potential claimants struggling to meet the required standards


to make a successful claim,” says Michael Aldridge, sales director at London & County Mortgages. “Given the historical criticism of the protection industry – valid or not – and


when the protection industry is under


ever increasing scrutiny around the payments of claims, the presence of ADLs as an incapacity definition not only risks damaging IP claims statistics but also the product itself. There is an argument to say that it doesn’t do what is a great product justice and that it shouldn’t be labelled as IP.” Cirencester friendly, which does not use ADLs, believes that task-based definitions are not always a suitable way of judging the impact that an illness or incapacity has on the ability of the claimant to do their job.


“If the mechanism used to judge a person’s eligibility for benefit is based on activities like bathing, dressing or climbing stairs etc then claimants might reasonably question their relevance to what they do for a living,” says Paul Hudson, Cirencester friendly’s chief executive. “After all, they are primarily insuring themselves against the risk of losing their income because of illness or incapacity rather than their functional status as a person.” Some advisers dislike ADLs so much


that they have never recommended an ADL plan to clients. One such adviser is Simon Dunn, protection specialist at Julian Harris, who says it is extremely rare that ADLs are the only IP option for clients. He believes an own occupation definition of incapacity should be used wherever possible, even if it means


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