There are many reasons for this. For some, especially in the mortgage advice market, time pressures mean it falls off the agenda. Others see it as a rather foreboding area of financial services, requiring them to discuss death, disease and their clients’ intimate health records.
Some advisers are also apprehensive about the underwriting process around protection products. Justin Harper, head of marketing at LV, explains: “Advisers fear the loss of control. They worry there might be delays if additional information is required, and that the premium they quoted for their client at outset will not be the final one they are offered.”
Under pressure
While these reasons mean protection stays off limits, there is growing pressure on advisers to examine their clients’ protection needs. Harper points to Financial Conduct Authority initiatives, such as its work on consumer outcomes under treating customers fairly and improving access to insurance, as evidence of the need for advisers to make protection part of their service.
In addition, the Insurance Distribution Directive has introduced new requirements to ensure advisers work in their clients’ best interests. Roy McLoughlin, associate director at Cavendish Ware, explains: “Anyone who intends to sell protection will need to do 15 hours of continuing professional development every year. In addition, any adviser who sees a protection need must be prepared to either address it themselves or signpost it.”
With pressure mounting, there are plenty of signs of improvement across the industry. The mortgage networks were first off the blocks with rules around making protection part of the advice process. For instance, back in 2015, Pink, which is now part of Primis Mortgage Network, brought in new rules requiring its advisers to discuss income protection with clients.
More recently, Sesame Bankhall relaunched its Rewire Routines campaign in May, asking advisers to sign a charter to make protection part of every mortgage advice conversation over a three-week period.
Some advice companies have also signalled their commitment to protection by bringing it in-house. These include St James’s Place, which acquired specialist advisers Future Proof in December 2018.
Perfect timing
Although there are signs of improvement, more needs to be done, given how many people are still unprotected. Katya MacLean, chief operating officer at Guardian Financial Services, says timing is everything when it comes to introducing the topic of protection. Sadly, where the focus is on a mortgage or investments, time pressures mean it can often be something of an afterthought, with lacklustre results.
Rather than wait, Ms MacLean recommends bringing it into the conversation at a much earlier stage. “Talk about protection when you are looking at the financial planning goal, whether this is buying a home or securing a good standard of living in retirement,” she explains. “By connecting protection to something positive, it takes away the negativity that can be associated with death and serious illness.”
Tools are also available to help advisers introduce the topic. For example, in exchange for four pieces of personal information – age, sex, smoker status and retirement date – LV’s Risk Reality Calculator enables an adviser to generate a personalised risk report showing their client the likelihood of scenarios such as death, serious illness and being unable to work for two months or more.
Mr Harper says the calculator’s ability to provoke a protection conversation has led to firms, including several networks, adopting it. “Openwork has introduced it for its members to use alongside mortgage advice. Giving clients a personalised risk report has resulted in a 20 per cent increase in protection sales,” he adds.
Creative writing
As well as recommending protection as a means to shore up a client’s other financial plans, some advisers have successfully introduced the products as a way to address other needs. This is the case at St James’s Place Wealth Management, which recently joined the Protection Distributors Group as part of its ambition to ensure its clients have access to affordable protection products.
Rather than limit the focus to clients taking out mortgages, Tony Mudd, divisional director, tax and technical support at St James’s Place, says there is merit in taking a ‘bank of mum and dad’ style approach to cracking low take-up of protection. “A lot of people do not take out protection with their mortgage because they either do not understand it or they cannot afford it,” he explains. “Encouraging parents to do it on their behalf helps to pass wealth through the generations while ensuring that, if something bad does happen, they will not need to turn to their mum and dad for financial support.”
Positive packaging
Insurers are also coming up with more creative approaches to packaging protection. Value-added services such as virtual GPs, second medical opinions and health and wellbeing support cater for what Mr Harper describes as the “little bumps in the road”, where someone can use the product but does not need to make a claim.
Also falling into this category are partial payments on critical illness insurance for less serious conditions and fracture cover, which is offered by several insurers including Aviva, LV and Zurich. For example, for an additional premium of £4 a month on its life, critical illness and income protection products, Aviva will pay out in the event of the policyholder sustaining any of 18 different fractures. The most it pays is £6,000 for an open fracture of the skull, with a broken arm receiving a handy £3,500.
Being able to promote these more everyday services can also put a positive spin on protection and help to counter the ‘it won’t happen to me’ mentality. “Advisers can turn the protection proposition on its head, promoting these services with some insurance on the side,” adds Mr Harper.
Pain-free processes
As well as developing more attractive products, insurers have also addressed some of the issues surrounding the application and underwriting processes.
The protection industry has long been dogged by frustrations such as long application forms requiring detailed medical history, slow decisions on acceptance, and loaded premiums. But Ms MacLean says these are now a thing of the past. “Insurers have made huge improvements to their processes. If an adviser had a bad experience in the past, I would recommend trying it again.”
Among the improvements are tele-interviews, where an adviser can pass a client on to an experienced insurer representative to talk them through the underwriting process; and pre-underwriting tools, to provide a more accurate estimate of the price when the adviser is aware the client may be loaded for a medical condition.
The industry is also keen to support those advisers for whom even these improvements are not enough to convince them to look at protection. A referral service is being set up through the Protection Distributors Group to enable advisers who do not wish to recommend protection to pass the client to a specialist.
Mr McLoughlin says advisers should feel confident about using such a signposting service. “In every other profession it is the norm to refer a client to a specialist. No one expects their GP to be able to perform brain surgery. This will ensure that every client gets the protection advice they need.”
Whether an adviser is looking to add protection to his or her own advice remit, or to establish professional connections with specialists who can provide this advice, protection can no longer be a taboo topic. As the regulatory and moral pressure increases, ensuring clients’ protection needs are met is rapidly becoming part of an adviser’s duty of care.
