Protection  

Undervalued investment

Jeff Prestridge

Jeff Prestridge

I often think that insurance is the forgotten component of the financial world.

Thoroughly underbought, horribly undersold. Peripheral, when it should be the cornerstone of most families’ financial arrangements. A great shame.

Why is this? Well, for a start, insurance is not a particularly sexy financial product (certainly less alluring than a tax-friendly Isa or pension).

For most of the time, the insurance experience can seem like throwing money down a deep well, with the money never being seen again.

Of course, some insurances cannot be sidestepped, but others can and routinely are because they are considered poor value for money.

Step forward financial protection insurance.

I have many friends who believe most insurance is a waste of money and therefore it should not be touched unless it is an absolute legal necessity.

None of my regular rants on the need for insurance in most aspects of our lives – usually delivered over a glass or three of the finest Rioja – ever seem to persuade them.

Indeed, the most truculent of my friends are fellow journalists (non-financial writers) who look at the world through a prism dipped and dripping in cynicism.

“Waste of money,” they tell me. End of story.

They are not for turning, even when events happen in their lives that could have resulted in insurance coming to the rescue.

Most insurers, it must be said, do themselves few favours, often increasing premiums without rhyme or reason.

My email account is full of complaints from readers of The Mail on Sunday spitting feathers over premium increases that they argue are unjustifiable.

Loyalty, they say, counts for little in the world of insurance.

Indeed, loyalty is routinely abused, hence the Financial Conduct Authority’s current interest in the area (triggered by a super-complaint issued by those splendid people at Citizens Advice).

As for claims handling, it is still a fact that most insurers make policyholders sweat profusely and jump through hoops before they are prepared to pay up.

Of course, insurance companies need to protect themselves from fraudulent claims, but sometimes dealing with the claims department of an insurer is as painful as having root canal surgery – and sometimes more expensive if the claim ends up being rejected.

There are more negative things I could say about insurance – for example, communications from insurers written in a language from a different planet and identical policies being sold to existing and new customers, but where the premiums are lower for the newbie.

But you probably get the picture by now. Not that I need to convert Financial Adviser readers.

Most financial advisers I meet also seem rather dismissive of insurance, preferring instead to concentrate their efforts on wealth creation.

Of course, there are exceptions to this rule, but they are few and far between.

I think the same argument – that of unsexiness – can be applied to the reporting of insurance in the financial press.