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Few financial advisers these days focus solely on protection insurance - with some notable exceptions - but it remains at the core of what giving financial advice is all about.

Indeed, the old maxim of 'living too long or dying too soon' still applies when it comes to people's main financial needs, even if clients, markets and products are now much more sophisticated than that suggests.

But, protection is not currently seeing the heady period of high sales it enjoyed as recently as 2003, so what has gone wrong and is there any sign that that is changing?

First it is useful to look at the statistics. Table 1 shows the Protection Review index of long-term protection sales. It compares the number of policies sold in 2007 with the number sold in 2000 and is based on Association of British Insurers sales data. Anything below 100 shows that sales have fallen since 2000, anything above shows that they have risen.

Table 1. Protection Review long-term sales indices to end 2007

Source: Protection Review 2008

Since 2000, the UK’s working population has risen by just over 8 per cent to 29,398m over the same period so, as most protection insurance is taken out by working people, we might have expected protection sales to rise by 8 per cent too.

They did not, and if it was not for mortgage-related term sales, the picture would look even bleaker. Despite a fall in the number of houses purchased with a mortgage in 2007, the overall mortgage market was up by 23.5 per cent between 2000 and 2007, according to the Council of Mortgage Lenders, to over two million new mortgages.

Compare that figure, 2.1m with the 771,000 mortgage term plans sold in 2007 and it is clear that even that market is far from saturated.

It is no surprise then that reassurer Swiss Re has reported a protection gap - the difference between the life cover people have with what they need or should have - of £2.36 trillion last year.

So why the fall in sales? Some reasons are well documented:

• High levels of claims being rejected because of non-disclosure have led to a fear that the industry has lost the trust of not just end consumers but of some intermediaries too.

• Critical illness cover has been grappling with how to be futureproof. That has meant a raft of new definitions and guidelines - all helpful when viewed individually, but perhaps adding up to greater complexity.

• The perceived overriding importance of price has forced insurers into seeking profit not from the products themselves but from underwriting. By giving standard rates only to people likely to show lower than normal mortality, insurers can recoup profits that they have lost by having to appear at the top of portals' pricelists.

• In turn, that led to application forms approaching and then exceeding 30 pages long. Again, the case for doing that was perfectly logical but, to an outsider, we looked like an industry doing everything it could to discourage advisers from writing protection business.

• Many advisers now focus on investments and pensions rather than protection.

And what of clients themselves? There has been relatively little publicly available research with consumers about their attitude to health insurance so we decided that this would be a good area for this year’s Protection Review to look at. Swiss Re kindly supported this research and in May, ICM Research polled 1,003 adults to find out if they don’t have life insurance, why not?

The main reason cited by almost a third of respondents was 'I have not thought about it'. The full list of responses was:

Table 2. What is the main reason why you have not purchased life insurance?

Source: Protection Review 2008/ICM Research

It is interesting to note that while we are rightly concerned about whether clients trust insurers to pay out on claims, only one in fourteen people cited this as their main reason not to buy life insurance.

Another significant response was that 20 per cent of those polled said that they could not afford life insurance. Really? The cost of cover has come down considerably in recent years, reflecting the fact that people are living longer and also that price is now driving the market. In short, consumers have never been able to buy cover so cheaply.

What this and Swiss Re's protection gap research suggests is that there is now a critical knowledge gap that is stopping consumers from buying life cover. In essence, for a lot of people, no one is telling them they need cover, how much they need, how much, or how little, it might cost, and how best to buy it.

Anecdotally, some advisers appear to have been glossing over clients' protection needs and focusing instead on their pension, mortgage or investment and savings needs. If they have been, frankly I would not altogether blame them. After all, insurers have hardly been going out of their way to make selling protection easier, while delays in getting medical information from GPs, a long running issue not helped by GPs recent big income increases from the NHS, more ratings and declinatures and generally poor quality 'admin' with some life offices hasn’t helped either.

But our research for this year's book shows that that is changing too. Most of the leading protection insurers have been busy embracing e-business, tele-underwriting and straight though processing and looking to materially improve the process from initial quotation right through to policy issue. Slowly, we are seeing service standards improve, while some insurers can now boast of same day acceptance for 'clean' online applications.

Elsewhere, work by the ABI and others has led to concerted efforts to reduce non-disclosure, to increase understanding of what policies cover and to start to rebuild trust with consumers.

All of which should encourage more advisers to ramp up their marketing of protection solutions. But is it?

Again, it is still early days, but I think that we can give that a qualified 'yes' too - and part of the reason is the much heralded 'credit crunch'.

At the end of last year we worked with the Personal Finance Society to undertake a poll of their members about protection. This was not long after the Northern Rock debacle, and one of the things we both wanted to know was whether that had influenced advisers to look again at protection.

Over 700 responses were received to the survey questionnaire PFS sent out. Already - this was November 2007 - 18 per cent of respondents were reporting that they were looking more closely at the protection insurance market again. These 'early adopters' were doing so for a number of reasons - some had suffered falling mortgage sales, some recognised a strategic or tactical opportunity while others were simply expanding their businesses - but the overall effect was that they had recognised a change and were now taking action so that they, and their clients, would benefit accordingly.

It is too early to know whether protection sales will quickly get back to or even exceed 2003 sales levels, or whether the fall in mortgage protection sales will outweigh higher levels of protection business elsewhere. Overall though, our conclusion is that the protection market is now showing more optimism than has been the case for some years.

Andy Couchman is co-author of the Protection Review 2008