It is easy to feel frustrated by the number of customers not buying protection with their mortgage, the lack of protection cover for businesses and the lack of protection solutions used as part of IHT planning.
However, while we attempt to solve these big challenges, we should also celebrate the improvements we are making as an industry. One of the biggest improvements is in the quality of protection advice from mortgage brokers and financial advisers.
Historically, many advisers recommended decreasing term or decreasing term plus critical illness linked to the sum assured of the mortgage.
Over the past decade, mortgage brokers and financial advisers have refined their protection conversations and recommendations to help customers consider a broader set of protection needs and take out more customised protection policies.
Income protection is more comprehensive than critical illness because policies cover more conditionsThe growth in more customised policies can be evidenced by the increasing number of covers sold within each protection policy.
For example, at Royal London more than a third of our protection policies sold this year have multiple covers and this figure is 28 per cent higher than last year.
The increase in covers has been driven by four trends. First, more advisers are recommending income protection to cover mortgage payments.
Income protection is more comprehensive than critical illness because policies cover more conditions including mental health issues.
Advisers are flexing income protection deferral and payment periods to help customers balance coverage and affordability. Second, more advisers are recommending decreasing term and family income benefit.
This approach allows customers to cover their mortgage payments and living expenses and to select different policy terms for each need.
Third, more advisers are having conversations and making recommendations for children’s critical illness. And finally, more advisers are recommending separating protection policies for each partner to recognise differences in their income and expenditure.
On top of these trends, advisers have worked closely with their compliance colleagues to ensure these changes are easily captured in their suitability reports.
This more customised menu-based approach can significantly increase opportunities for a customer to claim on their policy without materially increasing their policy premiums.
If the protection industry focuses on total new premiums or new policies sold each year, it does not capture these exciting changes in protection advice and customer outcomes. The mortgage broker and financial adviser communities deserve credit for these improvements.
However, as an industry we must not be complacent. There is more we can do to embed this approach across the market.
There is also more for Royal London and other providers to do to make it easier for advisers to have ongoing protection conversations and adjust their recommendations when customer circumstances change.
The way we work with advisers is critical to ensure customers are financially prepared for the challenging times which may lie ahead.
Tom Dunbar is head of sales at Royal London Intermediary
