Protection will 'dominate' advice conversations

Protection will 'dominate' advice conversations

Covid-19 caused big shifts in consumer sentiment, priorities and perceptions of risk. It made everyone more aware of their own mortality as well as the impact a crisis could have on their health and their finances.

For our industry, this crisis strengthened the case for discussing protection.

Now we are facing a crisis of a different type: the rising cost of living.

The Opinions and Lifestyle survey carried out by the Office for National Statistics says 83 per cent of adults reported an increase in their living costs in March 2022 compared with 62 per cent in November 2021.

The question for us is whether this latest crisis – the level of inflation and its impact on consumer budgets – has started to ‘close the door’ on the appetite for talking about protection.

It is almost certainly going to be dominating advice conversations.

Our biggest job right now is to make sure that clients are not distracted from their protection needs.

One way to do this is to remind people of the reality. Cancer is the biggest cause of claim according to the Association of British Insurers.

We know from charity Cancer Research UK that one in two people get cancer during their lifetimes.

Most crucially, they tell us that it is not just elderly people who get it. Adults aged 25-49 contribute around a tenth (9 per cent) of all new cancer cases, and adults aged 50-74 account for more than half (54 per cent).

These statistics show why it is so crucial for advisers to be discussing a broad range of protection products with clients, and particularly critical illness insurance.

Yet the most recent picture of product holding in the UK – the Financial Conduct Authority’s Financial Lives survey – shows just how exposed the population is.

This survey was last run in February 2020, before the pandemic, so while it is a little out of date, it still gives us the best current illustration of consumers’ situations.

At the time, 31 per cent of the UK population had life insurance in place. By contrast, just 14 per cent had a critical illness product.

Obviously we will be looking at the next set of Financial Lives data with interest to see if this has shifted, but based on the latest snapshot we have, this relatively low penetration of critical illness insurance compared with life insurance is worrying. 

Loss of health has significant potential to devastate family life.

Evaluating value

Advisers are well positioned to help clients understand the different risks, as well as to appreciate the value of the most appropriate protection cover – not forgetting of course, the value of their advice recommendation.

But what do we mean by value?

Value is personal and can mean different things to different people.

However, when it comes to critical illness cover, value must be linked to the certainty of payout.

The more likely the policy is to pay out, the more confidence clients can have in their adviser’s recommendation.