ProtectionMay 26 2021

How to move clients past the cost of protection

Supported by
Scottish Widows
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Supported by
Scottish Widows
How to move clients past the cost of protection
Credit: Anna Tarazevich via Pexels

As financial advisers transition with their clients back to relative normality, lessons from the pandemic will influence the discussions held and decisions made for years to come.

One of the prominent areas rising to the fore of both client and adviser interest is how best to cope with the unexpected. For advisers, this may mean raising the topic of protection with clients.

A lack of information and reluctance surrounding the cost of protection can inhibit these discussions. The onus is on advisers to initiate, but in a way that prioritises the benefits while being frank and open about the price tag. 

Vikki Jefferies, proposition director at Primis Mortgage Network, admits that these upfront and accessible discussions are not synonymous with the jargon associated with the protection sector.

Protection in the real world

“Putting the cost of protection into context is often a useful way that brokers can illustrate how affordable it is – a fact they might otherwise be unaware of,” Jefferies says.

“The cost of income protection, for example, can start from as little as £10 a month, equivalent to the price of a streaming service like Netflix. By comparing the cost of protection with the price of a product the customer already has, brokers can effectively discuss this point and help clients realise how affordable cover can be.”

She adds that the single most effective way of framing this discussion is to integrate real life examples, explaining to a client how a policy has made an impact on a person or family in their time of need.

“Sharing the stories of willing case studies allows borrowers to better relate to the products and see how cover can mitigate very real risks for them and their families, which can make this a hugely beneficial exercise for advisers,” Jefferies says.

Steve Bryan, director of distribution and marketing at The Exeter, says that protection should become a more prominent discussion in advice businesses, helping mitigate and contextualise the discussion around cost.

“If Covid-19 has taught us anything, it’s that we are all vulnerable to a change in circumstance almost overnight,” Bryan explains.

Research from The Exeter revealed that 70 per cent of the working population consider the pandemic to have made income security a bigger financial priority. Yet substantially fewer have been encouraged to take out an IP policy: only 22 per cent said that Covid-19 prompted them to consider taking out an IP policy.

“There is a clear disconnect between the financial fragility of the nation and customer attitudes towards turning to the insurance industry for protection,” Bryan says.

“Unfortunately, while the pandemic has financially impacted millions across the nation, the reality is that few protect their most valuable asset: an income. Advisers must take the opportunity presented by the pandemic to highlight the importance of IP and the dangers they face without it.”

Sharing the stories of willing case studies allows borrowers to better relate to the products and see how cover can mitigate very real risks for them and their families, which can make this a hugely beneficial exercise for advisers.--Vikki Jefferies

Need for clarity

There is a notion surrounding protection policies that they are sold rather than bought. While advisers are typically renowned for making complex ideas accessible, there is still work to be done to facilitate constructive conversations around protection and ease client worries around cost.

The Exeter’s research showed that just half of adults think the language used to describe insurance products is easy to understand. Of those who already had IP or had considered purchasing it, more than a quarter (26 per cent) said they found it difficult to understand what the benefit of IP was, what it covered, and when it would pay out. 

“The protection market is one that constantly evolves based on the needs of consumers, and I believe it’s a sector that is very quick to react,” says Makayla Everitt, head of business development at SimplyBiz Mortgages.

However, Everitt says there are areas of the market that could be simplified, improving client confidence in the cost of protection.

One area is communications from advisers and brokers, something that Everitt says is “absolutely key to helping improve understanding and build consumer confidence”. 

She continues: “Personally, I’d like to see an annual statement issued to clients, setting out clearly the cover they have in place and the additional services that come as part of that cover; for example, access to bereavement counselling, or a 24-hour GP service. 

“It’s natural that the protection cover a client has in place is something they don’t think about until they have to think about it. An annual statement could not only help them to understand the value of that policy, but also the value of financial advice, in line with their changing needs.”

The protection market is one that constantly evolves based on the needs of consumers, and I believe it’s a sector that is very quick to react.--Makayla Everitt

As well as provider-driven changes to the protection industry, Everitt argues that advisers should integrate protection into the overall cost of a financial plan, rather than an extra add-on that garners a further fee.

“For example, if a client has purchased their dream home, they need to understand that protection is a layer of reassurance to allow them to keep that property if anything unexpected may happen, rather than a hinderance," Everitt says.

Fundamentally, client confidence is dependent on transparency, honesty and the value added by an adviser. A tailored discussion of protection costs can go a long way in providing a fair and balanced view.

Tom Higgins is a freelance journalist