ProtectionOct 2 2019

Undervalued investment

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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.

Most journalists, especially younger ones, prefer to write about emerging markets or tech stocks than the attractions of critical illness cover, income replacement insurance or life cover.

If you do not believe me, pick up a good quality national newspaper this weekend (yes, buy one rather than read it online) and check it out for yourself.

Investments rule the money pages.

I often speak to the minority of financial advisers who are prepared to encourage clients to lay down some insurance foundations.

“How can we get our message across more effectively in the financial press?” they ask.

My response is usually to scratch my head before imploring them to get their clients who have made successful claims to speak to me – to be case studies in the paper.

They usually nod their heads in agreement and then I never hear from them again. Another great shame.

Although my personal insurance cornerstone is not as robust as maybe it should be, I was recently grateful for the annual travel insurance I took out this year ahead of an intended cruise with my feisty 83-year-old mother and younger sister Joy. 

A trip that was meant to be a treat for Mum, still grieving from the loss two years previously of her partner in life, Stan The Man.

What was supposed to be a gloriously sunny holiday taking in the sights of Malta, Athens, Souda Bay, Rhodes and Santorini (with copious amounts of food, wine and frenetic dancing thrown in for good measure) never happened.

Mum, sadly, was diagnosed with cancer a few weeks before the intended departure date – a cancer that required radical and immediate surgery, followed by an extensive period of recuperation.

We had no choice but to cancel our trip. Thankfully, my insurer met my claim, as did Joy’s.

A pretty convincing advert, I would say, for the power of insurance.

As convincing as the private medical insurance cover I have through work that ensures I have access to a brilliant urologist (Dr Ogden) as I fight prostate cancer with all my might.

Jeff Prestridge is personal finance editor of the Mail on Sunday