While there has, quite rightly, been much debate as to how the ‘advice gap’ can be closed in the pensions space given the complexities introduced by the 2015 reforms, the protection market shouldn’t be ignored and it is one that sits close to my heart.
A few years ago my daughter, aged 14 months at the time, suffered with meningitis and spent sometime in a coma as a result.
A distressing time for all would be putting it mildly, however one aspect that didn’t concern us was the potential financial impacts whatever the outcome may have been. Why?
Because we were well protected as a family, we’d been ‘sold’ the relevant cover by a passionate ‘life insurance salesman’ doing the right thing by his clients.
Protection products may be relatively simple (when compared to some designated investment products) and easily accessible via online services, but the simple fact is that many consumers do not proactively seek to take out protection policies.
Even less may take out such policies as appropriate to their actual, rather than perceived needs.
They are sold them by advisers with the right technical competence and moral compass.
In the last decade I’ve witnessed firsthand the migration of advisers to that of ‘wealth managers’, leaving themselves wide open for future complaints and compensation for not having provided the foundations of any protection plan.
A protection advice gap may also exist where consumers are taking out mortgages. If consumers refuse the offer of advice on their protection needs when taking out their mortgage, only a small percentage subsequently seek out this cover themselves.
Historically, mortgage lenders used to require evidence of how a mortgage would be paid off in the event of a customer’s death, but this no longer happens.
It may well be the case that consumers would be urged to at least consider their protection needs in some detail if mortgage lenders re-introduced the requirement to provide such information as part of the application process.
There is also a propensity for consumers to hold misconceptions about the number and level of claims settled by insurers.
Even though in reality a high proportion of claims are paid and relevant figures are made available by the Association of British Insurers (ABI).
The industry could potentially do more to promote these claims figures, to provide confidence to consumers that, should they need to claim on their policy the probability of it being accepted is high and regulatory standards underpinning the provision of protection should help instil confidence in purchasing decisions.
Let us not lose sight of what we’re here to do – work with clients to ensure they meet their goals and aspirations not just through investment, and not through ‘product pushing’ but through true financial and life planning.
Stephen Gazard is managing director of Sesame Bankhall Group