NRMA has rolled out a new income protection policy which makes use of agreed value and indemnity contracts within the same policy.
The product will offer an agreed value for the first 12 months of a claim and then become an indemnity policy for the remainder of the claim.
An agreed value contract is based on income at the time of taking out the policy while indemnity contracts are based on income at the time of disablement.
The reason for creating the product is, according to NRMA income protection financial services manager Richard Dunkerley, agreed value contracts can pay a customer more in benefits than they were able to earn while working.
“In some cases this creates the situation where the claimant may be healthy enough to return to work but are still receiving a payout from an insurer. If this payout is greater than the usual income any incentive to go back to work has been removed,” Dunkerley says.
However, the NRMA says the average claim length is nearly seven months and this new policy will give most customers an agreed value policy while protecting the insurer from long term agreed value claims.
“This hybrid approach is something which is unique and we believe it provides a fair deal to, and will not affect average, genuine claimants and protects the industry,” Dunkerley says.
At the same time, NRMA has included mental illness and chronic fatigue syndrome in the policy up to a time limit of two years. If the client is hospitalised by these illnesses, the limit no longer applies.
Dunkerley says the key driver behind the new product was pressure from its customer base.
“We have a huge customer base and a distribution channel that is not shared with other insurance companies. At the same time there was a demand for new products and we decided to broaden the range, income protection was the obvious choice,” Dunkerley says.
The new product will not be made available outside the NRMA branch and intermediary network for the present, he says, but will complement other new products including a stripped down policy which only has death coverage without trauma or disablement.
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