Overlooking the obvious

When advisers are talking to customers about the many benefits that protection products offer, two areas that regularly play a prominent part in the discussion are affordability and what the state or others will provide.

Taking care of your loved ones if you fall ill or die should be the mantra of every household. Yet all too often we get caught up in the desire for the latest gadgets or upgrading the Sky television package without thinking about that mantra or the consequences of ignoring it.

I saw some recent Friends Life consumer research that had interesting results. First, this research concluded that individuals felt that insurance was far more expensive than it really is. A high proportion of respondents felt that a 35-year-old male would pay more than £11 per month for £100,000 of term assurance over 20 years, while in reality, on average it is around £6 per month.

Protection products, primarily income protection, critical illness and term assurance, have never been so cheap. We have seen a downward trend in prices in the past several years.

But legislative changes due later this year, including the introduction of gender-neutral rates and tax changes, look likely to result in increased rates across different products.

If this is the case, then advisers should now be looking at their existing customer database to identify all those customers who have unmet protection needs. In addition it will be worth looking at customers who do have protection cover to ascertain whether their circumstances have changed and further top-up cover is required.

The second interesting aspect of the research was where customers would turn for support if they needed financial help. While 67 per cent of Britons revealed that they lose sleep over their future health, only half gave some prioritisation to protecting themselves or their families.

As many as 13 per cent said that they would rely on family or friends for financial support if they were too ill to work, but when asked if they themselves would be able to support their family or friends if asked, a massive 64 per cent said that they would not. In addition one in five said that they had their heads in the sand as they had no contingency plans if they were unable to work through illness.

This unwillingness to confront the facts is further extended as while nearly one-third said that they would rely on the support of their company sickness scheme in the event of illness, nearly half did not know for how long the company scheme would pay out for.

Finally even when a customer does buy a policy, it tends to be put in the drawer and forgotten about. Almost half of the people surveyed had never reviewed the cover they had in place. I suspect that a proportion of these people would have moved home, perhaps got married or even started a family. Yet the cover they have is still the one they originally bought. There is a clear opportunity here for advisers to review cover with their clients.