The recent scary antics of Halloween were an appropriate backdrop for Scottish Widows to release the even more frightening results of a survey about the protection coverage of the UK’s self-employed. Or, more accurately, the alarming lack of insurance protection, which could spell financial ruin for the individual and their family.
It is not possible to know how this lack of adequate protection compares to 20 years ago, when there were more than five times as many advisers. We know that there are already almost 4.5m self-employed and that they are one of the most rapidly growing sectors of the workforce.
What I find particularly disturbing about the survey are the results in relation to critical illness. Fewer than one in 10 of the self-employed have the cover they need and therefore face a real cost in hard cash terms. I do not mean the cost in premiums, which are peanuts compared to the benefits, but rather the financial cost to the individual of not having this important protection. This has been calculated to be almost £70,000 for a single year, and the average self-employed person admits their savings would be exhausted after just nine months.
The self-employed are the key victims of the protection gap, which should be of deep concern to both the government and FCA. Clients look to advisers on how to provide for their future needs, and we have a direct responsibility to both help them prepare for their later years through building up their savings and ensuring they are protected on their journey through life.
This is particularly relevant for self-employed clients, for whom self-reliance is so important. They do not want to see themselves, or their families, dependent on on the goodwill of the government for their standard of living and it is our job to help them achieve their objectives. Take the example of a mortgage. Their mortgage is invariably a major debt and, whether we actually arranged it or not, I believe it is essential we ensure it is properly protected by both life assurance and critical illness cover.
These survey results have highlighted the desperate need for advice; clients want help to buy the right solutions for their needs, let us not let them down. If we do, their futures might feel more like Nightmare on Elm Street than Halloween.
Ken Davy is chairman of The SimplyBiz Group