The protection gap among advised clients in the UK is “not acceptable” and indicates serious failings on the part of the advice sector, Keith Richards has claimed.
The chief executive of the Personal Finance Society said that the industry must share some of the blame for poor protection take-up with the general public, calling for a return to the “traditional advice hierarchy” where protection needs are considered first.
Speaking at a Finance & Technology Research Centre seminar, Mr Richards indicated that trade bodies such as the PFS would in future do more to “build soft skills” to boost protection advice.
He said: “The protection gap is evidence of serious failings right across the industry, which encompass advice, so the need for tools that enhance knowledge of protection has never been greater.
“Within the traditional hierarchy of advice needs, protection has always come first. A consumer who is uninsured but has an adviser indicates, in my eyes, a failure on the part of the adviser. If the client is told about protection but decides against it, that is fair but the situation is otherwise not acceptable.”
A report last week laid bare the scale of underprotection in the UK, revealing that half of all homeowners in the UK have no life insurance, while less than one in five and one in ten respectively have either critical illness or life insurance policies in force.
The Scottish Widows study, based on research carried out by YouGov among 5,221 adults, found that mortgage holders represented the bulk of protection customers, despite only 50 per cent of this group having any life cover, 17 per cent having critical illness and just 7 per cent income protection.
The results echo a separate YouGov study carried out on behalf of Friends Life in the first quarter of this year, which revealed of 2,031 people surveyed only 4 per cent have income protection, 7 per cent have critical illness cover and 23 per cent have life insurance.
Mr Richards’ comments came as F&TRC extended its quality comparison service to the protection field, allowing advisers to assess the best providers based on a range of measures outside cost.
Ian McKenna, director of F&TRC, said the need for this service was best illustrated by the fact that only 50 per cent of life assurance providers offer bereavement counselling, which is “widely expected by clients”, despite only a small variance in premiums.
Last month, London-based Drewberry Insurance devised a family insurance tool to help take clients through their protection needs. Tom Conner, director of Drewberry, said the system, which compiles recommendations based on responses to five questions, would “help the public to make more informed decisions” about a complex area.
