By Ian Sawyer, Commercial Director at Howden Life & Health
In today’s uncertain economic climate, financial resilience is more crucial than ever. Accident, Sickness & Unemployment (ASU) insurance is becoming more popular and should be considered for some individuals who want a short-term income safety net. While it is not an alternative to traditional income protection, it is another viable option that can suit the right customer, particularly those who may not qualify or be able to afford a comprehensive long-term income protection policy.
Understanding ASU Insurance
ASU insurance is a short-term policy designed to provide temporary income replacement, typically up to 50% of earnings for 12 to 24 months, in the event of accident, sickness, or involuntary redundancy. The goal is to help policyholders cover essential expenses such as mortgage payments, rent, bills, and daily living costs while they recover or seek new employment.
How ASU Compares to Traditional Income Protection (IP)
Customers may confuse ASU insurance with traditional income protection (IP), but the two serve different purposes. It’s not a Replacement, but an Additional Option.
| Feature | ASU Insurance | Traditional Income Protection (IP) |
| Coverage Duration | Short-term (usually 12-24 months) | Longer-term (potentially until retirement) |
| Payout | Fixed benefit, often up to 50% of income | Replaces a portion of salary, typically 50-65% |
| Underwriting | Simplified, often guaranteed acceptance, standard exclusion for pre-existing conditions, basic back or stress conditions. | Full medical underwriting required
Subject to none or personalised medical exclusions |
| Claim Conditions | Covers accident, sickness, and redundancy | Covers only accident and sickness (not redundancy) |
| Premium Costs | Typically, lower | Typically, higher due to long-term coverage |
| Ideal For | Short-term financial security | Long-term income replacement |
Market Trends and Statistics
While specific data on the number of ASU policies written annually in the UK is limited, the demand for income protection products has been influenced by various economic factors. Notably, the UK has experienced a significant increase in health-related welfare claims, with a 38% rise over four years, affecting 3.9 million working-age individuals 1. This trend highlights the growing awareness and need for financial protection.
At Howden, we report a 25% YOY increase in demand and a 14% rise in average premiums. Demonstrating the increased demand for both ASU and Traditional versions of IP.
This is not reflected in the mortgage or pure protection arena’s suggesting that there is a vast gap in customer needs not being met, and thus foreseeable harm not being prevented. Increased distribution or signposting to Howden or other brokers must increase.
Who opts for ASU Coverage and Why?
ASU insurance appeals to a diverse range of individuals, particularly those without substantial savings or alternative financial support. Recent research indicates that as many as a quarter of UK households have less than £95 saved 2, highlighting the vulnerability of many families to a sudden income loss shock. For these individuals, ASU policies provide a crucial buffer against financial hardship, ensuring continuity in meeting financial obligations.
ASU has a wide target market generally for employees earning less than £100’000 and caters for almost all occupations. ASU is also available as AS only for the self-employed at approximately a 15% discount, which is attractive also to tradesmen wanting simple cover for shorter periods and without lengthy medical questionnaires.
- The usual age range for ASU is 20 to 64, but both the mean and mode age is 38.
- Top Industry Categories: Construction, Manufacturing, Education, Retail, Engineering, Construction & Property, Transport, Healthcare, Financial Services
- Top Occupations: Manager, HGV Driver, Sales Manager, Administrator – Office, Accountant, Nurse, Teacher, Builder, Project Manager, Warehouseman
The Role of the Income Protection Task Force (IPTF)
Recognising the importance of ASU products, I was pleased to see the Income Protection Task Force (IPTF) expand its focus to include members from the ASU sector. The IPTF aims to raise awareness, provide education, and increase understanding and sales of all income protection options, including ASU. This new focus acknowledges that ASU insurance can be particularly beneficial for individuals identified as underserved in the recent IPTF & Iress – Profile of an Income Protection Customer report. There will be more education and Insights this month from the IPTF.
References
- Institute for Fiscal Studies (IFS) “Health-related benefit claims post-pandemic: UK trends and global context,” published in September 2024.
- Money and Pensions Service (MaPS)
- Howden Life & Health
