Asteron Life’s new income protection product, Workability, is designed to make income protection more affordable, and focus on assisting the client on a return to work.
Rating Process
We have rated the product, but some rating issues remain and will probably be improved after discussions with Asteron Life that are ongoing. We will detail those areas here so that you can clearly identify the issues and use the current rating appropriately.
The launch of the product has challenged us to look at the weighting given to some items within the income protection rating model and we will start discussions with all income protection insurers in order to try and bring more data to the decision around the right weighting for those items.
Overview
From a pricing perspective Workability will usually be the lowest cost option in any basket of product you select on Quotemonster, by a margin of 10% to 12% below the next lowest, 30% lower than the most expensive in a reasonable comparison set. You can create a comparison with products that are even more expensive.
From a summary rating perspective the product scores 58.54 points in a field where the scores are typically between the low 60s and high 90s. Westpac’s cover scores 57.44.
What accounts for the difference?
Lots of features are left out, deliberately. This makes the product much simpler, and cheaper. The absent benefits range from tiny and rarely used to more significant and familiar features. Here are three illustrative examples:
Travel and transport features can account for up to 0.14 points in the comparison and are not present in this product. They are rarely claimed on and will not be missed by the budget conscious.
Trauma and TPD benefits are more significant, accounting for 3.6 points. Some advisers like to see income protection as a catch all product, but others say that if they want Trauma and TPD they will buy them in their own right for the right amount. This product leaves you to add them on if you want them.
The absence of a hospitalisation or bed confinement feature is one that may make you pause for thought. It cannot be added separately and some clients will expect that a benefit bad enough to put you in hospital ‘ought’ to pay you something.
You should check a full research report to identify all the differences.
There are also some significant structural differences:
The benefit payment basis is Indemnity, unlike every other product in Asteron Life’s income protection range which is Loss of Earnings or Loss or best of both LOE and Agreed Value. This has an effect on the amount score weighting because the regular long term benefit cannot take post-disability income above 75%, whereas in the Loss of Earnings configuration it could result in a total replacement ratio of 93.75%. You simply cannot build a budget income protection with a super-high replacement ratio like that. So this change is to be expected.
The short-term benefit is ‘own occupation’ definition. Most disability claims are short-term. Re-training is also not a short-term option. This fulfills the essential peace of mind requirement. This period is limited to one year, however, followed by a different definition for long-term disablement.
The long-term definition of disability is based on a test of being unable to work in an occupation to which you are suited by “education, training, or experience.” The fact that is not ‘own occupation’ will disturb some, but this is not the valid point of comparison. This product is about bring people into the income protection market that are either contemplating a two-year benefit period or no cover at all.
Partial disablement is subject to a work ability test not merely whether your claimant is or is not engaged in part-time work. Partial disablement is a feature that gets a lot of focus, but is in fact used much less than is thought. We are unsure how much difference the work test will make. We have made a deduction in the rating for it, but will seek more data in the future on how it is used.
There are some features which are better than market:
We particularly like that occupational retraining, rehabilitation and home modifications benefits can be accessed from the point of claim notification. There is no requirement for a period of total disability. This resulted in us increasing the weighting for these items and applying a penalty to insurers that do not permit access from day one. We have asked Asteron Life for more data on the use of these features and will be contacting other insurers to ask them for information on their use as well.
There are some unresolved features:
We expect to add a score for claim on leave without pay and unemployment. There are no explicit provisions for these but they will be covered under the long-term benefit. You can expect to see them added to the rating next week bringing an additional 1 to 2 points to the score.
Some issues of weighting have been raised:
Optional redundancy insurance items are probably weighted too low in the overall model. Various ‘back to work’ features may need to receive an increased weighting. We will also review the gap from the best to worst rating in the income protection range to see if that reflects probable claims experience.