A nationally representative survey of 1,000 consumers in July found more than half (55 per cent) were revaluating how they protect their future financial wellbeing in the wake of the pandemic.
But only 15 per cent claimed they would list life or health insurance as a top three priority to protect their financial wellbeing, compared with 77 per cent prioritising savings.
The survey also found a third (34 per cent) of consumers thought life insurance was confusing, two in 10 (22 per cent) thought providers were not 'honest and transparent' and 46 per cent thought life providers would find loopholes to avoid paying out claims.
Clive Allison, UK insurance protection leader at EY, said: “Covid-19 has shone a spotlight on longstanding challenges around consumer trust and engagement with core insurance products, even though they’re vitally important for many people.
“The perception many consumers have around claims payouts versus actual claims data shows there is a concerning and inaccurate mismatch which urgently needs addressing.”
A record 98.3 per cent of protection claims were paid out in 2019, according to figures released by the Association of British Insurers and Group Risk Development.
But separate research from the Association of Mortgage Intermediaries has found that more than half of consumers do not believe protection claim statistics.
Mr Allison added: "The research also shows many consumers don’t think of life and health insurance as a priority for their financial wellbeing and prefer to rely on savings instead, despite the fact a savings pot, in many cases, wouldn’t come close to covering all the necessary expenses in the event of critical illness or death.
"It is crucial that providers look to tackle these challenges by finding ways of strengthening relationships with existing customers. And, in order to attract new customers who could benefit from such cover, insurers need to better educate people on how life and health products can contribute to financial wellbeing – not just in response to the pandemic, but across a lifetime.”
Reasons for not having financial protection
The research by EY found more than half (54 per cent) do not have any financial protection policies in place.
Of those without financial protection, three in 10 (31 per cent) claimed they could not afford it, and a similar proportion (30 per cent) thought it was a ‘waste of money’.
Additionally, a quarter (23 per cent) thought other priorities such as meeting daily expenses were more important, and 16 per cent said they did not trust providers to act in their best interests or that they would pay if a claim was made.
Meanwhile, of those who had bought a protection policy, six in 10 did not use the services of an adviser. A third (35 per cent) did not see the value in paying for advice, while one in 10 (11 per cent) were worried about trusting someone else with their money.
Mr Allison commented: “It is crucial that insurers and financial advisors alike demonstrate their relevance and value to consumers as the financial fallout of the pandemic on households takes its toll.”
chloe.cheung@ft.com
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