Lack of trust leads to ‘drastic’ lack of protection

Lack of trust leads to ‘drastic’ lack of protection

The UK’s self-employed are highly financially vulnerable to ill health and yet drastically under-insured, in large part due to lack of trust in insurers, according to research from British Friendly.

A survey, conducted in April among 502 self-employed workers, revealed that lack of trust is one of the main reasons for not taking out a policy.

The research found only 2 per cent believe income protection claims are paid more than 90 per cent of the time by top UK insurers and nearly 1 in 5 stating claims are paid less than 20 per cent of the time.

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Published figures consistently show payout rates across all three types of protection cover are in excess of 90 per cent, often substantially so.

Almost half (45 per cent) believe the main reason income protection claims are declined is because insurers deliberately try not to pay them, while the perceived expensiveness is also a concern, with 30 per cent listing it as the main reason they do not have a policy.

British Friendly suggested that this is why 90 per cent of respondents do not have any kind of insurance policy in place that would help replace their income in the event that they are unable to work long term because of their health.

The survey showed that 58 per cent of respondents said their business would have to stop trading immediately if they were unable to work for at least the next 12 months.

Mark Myers, British Friendly’s chief executive, said that providers and advisers need to prioritise how the industry can effectively communicate to the self-employed that insurers pay a very high percentage of income protection claims.

“It highlights the need to continue promoting the message that consumers are vulnerable and that those people with insurance policies are better protected and do have their claims paid.”

Last week the former managing director of Bright Grey and Scottish Provident Roger Edwards urged advisers to talk about positive outcomes when explaining protection products, to try to dissipate negative connotations around the products.

Meanwhile, on the group protection front, a survey of 500 employers with 0-49 staff carried out in April by Canada Life Group Insurance, found that more than half (55 per cent) were prepared to consider other employee benefits when implementing auto-enrolment.

With an estimated 1.08m businesses of this size due to enrol at the start of next month, this potentially translates as 594,000 businesses being open to discussions on introducing benefits such as protection policies to their employees.

In common with the self-employed, the three most common reasons that sub-50 employers do not offer group life cover are that it is perceived as an expense the business cannot afford (42 per cent), employers do not know much about it (24 per cent) and the belief that staff do not understand or value it (17 per cent).

Over 90 per cent of small business employers believe group life cover costs would be more than 1 per cent of their payroll, with 45 per cent thinking it would be over 3 per cent, but in reality it typically costs less than 1 per cent.