Zurich Int’l Life warns consumers to ‘mind the gap’, citing research
Zurich International Life is urging consumers to become aware of the dangers of having a so-called “protection gap”, citing recent research it carried out which found that 75% of expats living in the United Arab Emirates have no provision in place to protect them in the event of illness, incapacity or premature death.
Of those respondents who said they do have some form of income-protecting insurance, the researchers said, “72% received this coverage from their employer”.
The life insurance arm of the Swiss Zurich Insurance Group said it carried out the research in partnership with the Smith School of Enterprise and the Environment at the University of Oxford.
The report, entitled Embracing the income protection gaps challenge: options and solutions, suggests ways individuals concerned about their income protection gap – which Zurich defines as “reductions in household income as a consequence of the loss or incapacitation of an adult wage earner upon whom [their] household relies” – might begin to close it.
An income gap is the reduction in household income as a consequence of the loss or incapacitation of an adult wage earner upon whom the household relies, taking all public and private income replacement in to account.
With more than a quarter of the workforce becoming unable to work at some point during their working lifetime, Zurich recommends to address critical issues and gives insights into how governments, employers, insurers, intermediaries and individuals can work together to close income protection gaps (IPGs).
Since there is no state provision to support those that suffer a loss of income due to illness, disability or premature death, the financial risk shifts to the individual or their employer.
‘Awareness of income protection’
For employers that provide income protection for employees, the benefits can be attractive. As per the report 6 out of 10 employees would rather have a good benefit package than just an increase in salary. Therefore employers have a great opportunity to retain and attract talent through the use of income protection schemes.
Zurich’s scheme pays up to 80% of income until age 65 if a claimant suffers a disability that prevents them from working. The degree of disability that triggers the payment is flexible, much like taking an individual policy with Zurich, an applicant starts with a blank canvas and builds a tailor-made solution.
Income protection can also tackle the global phenomenon of presenteeism, when sick employees come to work through fear of income loss, underperforming and possibly spreading contagion. The estimated cost for employers in the US alone is estimated at US$150bn per year.
‘Contextualising income protection’
For individuals global insurer recommends contextualising income protection within the wider household spending. For example, households typically maintain a credit card with an annual subscription cost. For the same subscription cost, households could purchase income protection insurance that provides more valuable benefits than that of the credit card.
Demand for income protection insurance is increasing exponentially as people are living and working longer. Although this is positive, it increases the likelihood that at some point in our career we may become unable to work due to a disability.
Reducing the income protection gap can save families from financial ruin, create advantages for employers and support governments in implementing regulation.