How big is the problem of a lack of awareness of protection in Britain, and how might this affect your ability to help more people get appropriate insurance?
The lack of take-up is a big problem. Reinsurer Swiss Re has estimated the so-called protection gap in the UK to be at more than £2.5trn in size.
Data from the Association of British Insurers has revealed that, in 2015, 25 per cent of all breadwinners had no life insurance policy in place. This equates to nearly 8.5m people in the UK.
But the gap is not just in terms of life insurance, but also in terms of income protection. A YouGov poll of 2009 UK adults, commissioned by Royal London in February this year, found nearly 5m renters in the UK had no plans in place to cover their rent if they could not work for three or more months.
Life cover used to be sold, often on the doorstep, but now these armies of sales people left the industry, so there is a big gap in the supply chain David PughDespite the cuts to housing benefits, 60 per cent said they could only survive on their savings for three months or less, while 53 per cent said their first port of call would be to apply for state benefits.
Kesh Thukaram, director of Best Insurance, thinks there is nowhere near enough awareness of protection in Britain.
Just looking at the workforce, he says: “There are approximately 27m people employed in the UK and yet the number of people holding short and long-term income protection cover is less than 2.5m – not even 10 per cent of the working population.
“Only one person out of 10 has made any provision to prevent debt escalation if their salary is lost due to an accident, sickness or unemployment, clearly indicating the need for protection campaigns.”
Mr Thukaram adds: “Research appears on a regular basis, warning the average UK household savings are so low most families have less than two weeks of cash to bail them out should their income be interrupted.
“Yet if, on average, a person were to set aside a £1 day, it would pay the premium for cover to fund them for £1,000 a month, over 12 months. Essentially, a £350+ outlay delivers a £12,000 return.”
Paul Avis, marketing director for Canada Life Group Insurance, points out this lack of awareness is affecting not just individuals but the UK.
He says: “This is actually a big potential problem. Figures show there are approximately 250,000 former employees trying to claim employment support each year, and between 330,000 and 350,000, including self-employed, trying to claim state benefits.
“This is a significant portion of the working population trying to claim at a time when state benefits are being reduced. For example, employment support is being cut from £5,300 to £3,800 from April 2017.
“The importance of getting protection is not getting through to employers or employees.”
Lack of salesmen
The lack of knowledge about the value of income protection, critical illness cover or life insurance is a big problem as the number of people able to advise on this type of cover has shrunk.
According to David Pugh, managing partner of consultancy Lemonade Reward, “everyone feels an innate need to protect their loved ones but since so few households have life cover, there is a disconnect between what people instinctively want to do and what they are actually doing”.
Mr Pugh adds: “Life cover used to be sold, often on the doorstep, but now these armies of sales people have either stepped up to being a qualified adviser, or most likely left the industry, so there is a big gap in the supply chain.”
Lack of education
With a lack of men knocking on doors to push this product education from an early age is going to be critical to get people aware of the need to protect themselves and their loved ones.
This is the view of Andy Nicholls, mortgage and insurance specialist for Beaufort Asset Management, who says: “Education should commence in one’s mid-teens and be part of the school curriculum.
“Parents should also have a responsibility to their children to talk through the matters, such as considering their future liabilities and why and what the parents currently do to protect their income and the family lifestyle.”
Education is also vital as people do not understand all the various types of cover, says Toni Smith, sales operational director for First Complete.
She explains: “There are so many products, types of cover, features and services within the market that aren’t known to the public, so an unprotected public needs proper professional advice.”
Even employers do not understand the benefits or costs of group risk protection.
According to Katharine Moxham, spokesman for Group Risk Development (Grid): “Recent employer research we did indicated awareness of group risk protection is lacking.
“For example, 70 per cent of employers thought it would cost more than it does, and only 38 per cent communicated their group risk benefits to staff through their intranet or staff handbook.”
Lack of engagement
However, not everyone believes a lack of awareness about protection is the biggest issue when it comes to a lack of take-up.
According to Alan Lakey, founder of CI Expert, there is also a lot of “apathy and a mental block which stops people from thinking about the potential consequences of premature death or ill health”.
He explains: “It is revealing how many of my clients become incentivised to take out protection when they see first-hand the consequences when their friends or family suffer.”
This has been brought home by a recent report from Axa PPP Healthcare, which provided statistics on how cancer - one of the top three reasons for protection claims - affects individuals and their families.
The report, Love for the Loved Ones, revealed one in two people born after 1960 are likely to develop cancer at some point in their lives, compared with one in three born in 1930.
This will have a significant effect on them and on their families, financially, mentally, emotionally and physically.
| Cancer’s toll on loved ones |
| 50% - people in England and Wales who survive 10 or more years |
| 500,000 people in the UK combine wirk with caring for someone with cancer |
| 30m - with 50% of those born after 1960 expected to develop cancer, 30m people could end up being carers for or financially supporting someone with cancer. |
| 23% - Those caring for someone with cancer who have been affected with minor health issues themselves because they were not looking after themselves. |
Yet despite these statistics, people are still slow to take out adequate financial protection to help them and their families deal with the strain on health and income serious illnesses, such as cancer, can bring.
Mr Lakey adds people are more willing to insure their pets, perhaps because “knowledge of the cost of vets’ fees provoke fear”, whereas people still believe the state will provide or their family will be able to help.
“Self-protection seems not to be at the top of most consumers’ awareness”, he adds.
Lack of clarity
Another reason why the advice gap has grown - and why more awareness is needed - is the lack of clear language and straightforward processes.
This has made things difficult for both advisers and the end consumer, says Phil Jeynes, head of sales and marketing for UnderwriteMe.
He explains: “Poor processes and perceived complexities in terms of product and application have stopped most large financial services’ touch points - such as banks or mortgage brokers - talking about protection in any meaningful way.
“The man or woman on the street knows what life insurance is and may have heard of critical illness cover, but may not have a firm grasp of what it is.
“To the majority, ‘protection’ is more about safe sex than serious illness.”
