Protection  

Understanding the value of protection insurance

At least that is the plan until the apathy sets in and the gym membership, the diet and all those other New Year’s resolutions are abandoned by the wayside. Personal resolutions might only last a month or two but in business it’s vital to keep the momentum going throughout the year. Certainly in the protection industry we need to build on the success achieved at the end of 2012 when applications for protection soared as advisers raced to get clients on risk ahead of gender neutral rates.

We ended the year on a high. But as we enter 2013 we will be doing so with the first major price increases the protection industry has seen for a very long time. The early part of the year will see a flurry of activity around gender pricing as no one knows where the new equilibrium price will settle. That could take days or weeks. RDR will also cause upheaval to the market and it could be a slow start as everyone gets used to the changes and fees become part of the advice proposition. So we will need to use all the means we have at our disposal to encourage people to buy protection and ensure sales remain constant.

Providers are constantly reinforcing the need for financial protection. They produce leaflets and sales aids, write blogs, articles and tweet about it. This is all valuable stuff. But sometimes it is those real life case studies that create the most impact. Reading about someone whose payout has been a real life saver. How it has enabled a family to pay off all or part of the mortgage and how it has helped them to retain their lifestyle after suffering a critical illness really hits the message home.

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But equally as hard hitting are the stories of those who did not have protection in place and who found themselves struggling to manage financially following a critical illness or the death of a loved one. Those stories are particularly tragic. And the message is further reinforced by looking at the websites of cancer charities. Among the statistics showing the number of people suffering from cancer, there is always reference to the financial impact a cancer diagnosis can have on an individual or family.

Of course, it is not only cancer patients who are affected. Any serious illness can have a sudden and unexpected effect on the family finances. Last year there were several reports in the news of stroke survivors and the financial impact a stroke has on people of working age. These reports are not only shocking because of the financial struggles people face but also because they highlight the fact that strokes affect younger people too. Far too often people believe that a stroke is something that happens to the older generation. Will reading these stories make people think twice about ignoring their financial responsibilities? Will the stats encourage them to visit an adviser and take out protection insurance? That remains to be seen. But these reports do help in highlighting the impact a serious illness can have on the family finances and also that it can happen to anyone at any age.

At the moment, people who need care or support due to ill health or disability can claim disability living allowance. However, over the next few years this benefit will be phased out and replaced with the personal independence payment. According to a government impact assessment, the change will lead to 500,000 fewer claimants and will result in over £2bn less being paid out. Great news for the Government but not for those who are struggling to make ends meet through no fault of their own. The reality is the mortgage, bills and rent still need to be paid for but a drop in income could make this impossible. The last thing someone will want to worry about when they are seriously ill is how they will pay the mortgage.