Consumers adopt ‘casino mentality’ to insurance

The simple products regime should include an insurance product that covers “essential expenses”, Peter Le Beau has claimed.

Mr Le Beau, co-chairman of Protection Review, said the insurance industry must do better to reflect the type of products consumers want and how they want to purchase them.

Speaking at the launch of a 67-page report, Where Are We on the Consumer’s Radar? Navigating A Route For Protection Insurance, Mr Le Beau said: “A simple product that provides for ‘essential expenses’ is something that is a feature of discussions we are having.

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“We will have to make sure it is seen differently to payment protection insurance.”

He predicted that more advisers would move into protection as a result of the RDR, but claimed too few were recommending income protection.

The report showed that consumers wanted to be able to access products both online and through an adviser, but found many would cancel products if loyalty was not rewarded, while others did not understand the main features.

The survey found up to 75 per cent were less likely to cancel an insurance policy if their loyalty was rewarded, while 80 per cent said it would be useful to receive an annual statement detailing their existing cover.

When asked about what type of insurance was the biggest priority, half said life insurance was the most important, yet 80 per cent of respondents could not identify accurately the correct description of how a basic life insurance policy works.

The report, compiled by the Syndicate, a partnership between Protection Review and Hannover Re, found consumers are adopting a “casino mentality” to their insurance.

The survey found 61 per cent of non-insurance holders were “living for today”, while 42 per cent of those who held insurance agreed with this approach.

Alan Lakey, partner of Hertfordshire-based Highclere Financial Services, said: “Consumers place a low value on protecting themselves and their assets and cannot be bothered to investigate matters with a subsequent low understanding of benefits and costs.

Sadly, too few companies offer a face-to-face discussion and rely on telesales, which is a tad sterile and fails to enable a full and beneficial discussion.”