It is understood that Tom Spink, creditor director at Aviva, told delegates at an industry conference on the future of PPI recently that short-term income protection would increase successful claim rates because it is underwritten at point of sale.
Currently most people wanting an annually renewable policy that will pay out in the case of accident, sickness or unemployment would take out PPI. However, PPI has received a lot of negative media coverage because is is underwritten at the point of claim and consequently has a high rate of rejected claims.
Aviva would not confirm specific details of the new product, or whether it believed it would replace PPI but a spokesman said: “Underwriting factors will come into play and we will ask about income and the preferred length of the policy term.”
Aviva plans to distribute the new product via the banks and intermediaries it partners with.
The spokesman added that should be “ready for 2011” though he could not confirm a specific launch date.
Nigel Payne, managing director of Assurant Intermediary, a general insurance specialist, told Mortgage Introducer: “It is the only sensible move to make given the press and criticism that PPI has had over the past few years.
“It’s like saying you’d buy car insurance without knowing you’re covered. This has to be the right move both for the provider and the consumer.”
And protection guru, Kevin Carr, added: “I welcome these things – there’s definitely a place for short-term income protection. It’s less expensive and many advisers often use these short term products as a stepping stone to full cover.”