POSTED: November 15 2017
The income protection gap challenge: options and solutions

The income protection gap challenge: options and solutions

Protection insurer, Zurich has released its latest research into the protection shortfall, its challenges to employers and where improvements can be made.

Gary Shaughnessy, Zurich’s CEO EMEA, outlines his thoughts on their research and where insurers, individuals and employers need to make changes.

“The ability to ensure financial security in the face of crises such as long-term illness or disability is crucial to our personal security lives and the future of our families. The opportunity that this brings for governments, employers, insurers and individuals to work together is critical and growing. Read the exclusive recommendations to solve these income protection gaps.

Increasingly more people in the world are facing challenging gaps in their household income when they experience a shortfall due to sickness, disability or another severe reason. The question is: what can they do about it?

Over the course of the last three years, Zurich, in collaboration with the Smith School of Enterprise and the Environment at the University of Oxford, has steered a scope of research to answer this very question and to reveal just how widespread the issue, called income protection gaps, is in various parts of the world.

Our newest report, Embracing the income protection gaps challenge: options and solutions, based on extensive research, outlines practical recommendations to address critical issues and gives insights into how governments, employers, insurers, intermediaries and individuals can work together to close income protection gaps (IPGs).


A need to act quickly

There is an urgent need for solutions.  The ability to ensure financial security even in the face of crises such as long-term illness or disability plays a crucial role in our lives and the future of our families. The challenges that this brings, to governments, businesses and society as a whole, are becoming critical. This is particularly true as demand for government support – the traditional source of relief – rapidly outpaces supply, while at the same time, disability levels are rising as populations’ age. The need to solve this problem is serious and becomes more so with each passing year.

As life expectancy increases, extending one’s working lifetime can provide financial rewards. Yet more years working also puts individuals at increased risk of becoming disabled during their career. Chronic sickness, injuries or other conditions can prevent or impair a wage earner’s capability. With state resources constrained, and a growing number of people working part-time and temporary jobs, people are increasingly at risk. An IPG could seriously deplete household budgets, savings and retirement accounts. The burden of guaranteeing long-term financial security is simply too great for many individuals to bear.

Solutions include finding a balance between responsibilities assumed by governments, employers, insurers – and other financial institutions like intermediaries – and individuals in protecting household income.


Key recommendations include:

  • For insurers: Develop basic insurance products to be introduced via employers under auto-enrollment (in legally approved local jurisdictions), with additional features available for individuals wishing to purchase them.
  • For employers: Enroll the workforce in contribution-based income protection insurance schemes (with an opt-out clause) as part of their employment contracts. Provide employees with ongoing financial education and training, including the use of digital tools.
  • For governments: regulate and certify (or trademark) approved IPG insurance products and use fiscal incentives to encourage compliance. Extend obligations to information technology (IT)-based platforms and agency workers.
  • For the individuals: personal experience of IPGs is a bigger factor influencing demand than financial literacy. Cost perceptions pose a barrier – but most people believe income protection insurance costs are higher than is likely to be the case. The rise of the ‘sharing’ economy is putting more individuals at risk, and older workers are more likely to lack protection.
  • For insurance distributors and intermediaries: agents, brokers, banks, employee benefits consultants and others have important functions, not just linking supply and demand but importantly advising and educating customers (whether employers or individuals) and feeding market and customer requirements back to insurers.”



You can see the Zurich press release in full here.