Advisers need to make protection relevant


According to statistics...

Advisers need to make protection ‘relevant’

According to statistics, decision making is 10% reason based and 90% emotional. This behaviour is clear when people purchase homes, often saying they need to get a certain ‘feeling’ about a place rather than a property just being perfect on paper. So when it comes to life and illness insurance you would think the emotional reasons behind the need for cover would be an effective way to engage people. In reality, this proves difficult when you are trying to get people to buy into something that they hope they never need to use.

A new report from The Syndicate, a research partnership between The Protection Review and Hannover Re UK Life, found that consumers find it hard to see the value in purchasing and retaining protection products. The research showed there is confusion around protection products, and that a lack of engagement from our industry makes it easy for people to prioritise their spending on other more immediately tangible products.

The report also showed that many people are lapsing policies, due to their perceived value and benefit diminishing after the sale. The benefits of a protection policy are not tangible enough for those who have not made a claim. Over 70% of people who have protection products said they could not recall any contact about their cover in the last two years, making it easy for people to cancel policies and view protection as a transactional purchase, rather than a relationship.

So it is clear that providers and advisers must continue to emphasise the value of protection long after a sale has been made. Whether the client can be continually engaged by having a policy that gives them discounts and rewards for healthy living, affords them membership to a mutual offering benefits and discounts on other more tangible services, or if they are sent a yearly statement reminding them of the value of the cover they have in place, it can all help to ensure protection continues to feels like a relevant and important purchase.

Is the cost of cover wildly overestimated?

People’s general perception of the cost of protection is unrealistic, according to research from The Syndicate. On average, people believe that life cover costs £66 per month, critical illness cover costs £60 a month and income protection £49 a month. When you compare this to the average premium paid by customers of protection intermediary LifeSearch, which stands at £28 a month, you can see that people have a distorted view of the cost, and therefore the value of protection.

This becomes even more apparent among a younger age group, with 18-24 years olds believing life cover costs £105 per month on average, critical illness cover £110 and income protection £87 per month. For someone in this age group, taking out £150,000 of life cover over 25 years can cost less than £10 per month.

It is interesting that people in general believe life cover is more expensive than income protection. This shows a lack of understanding in the cover each product provides, and the likelihood of making a claim on each policy. People are much more likely to be unable to work through ill health than they are to die within their working life, yet deem income protection to be less expensive and relevant than life cover.

News in brief:

• CI Expert, a critical illness (CI) comparison site for advisers, has upgraded its functionality to make it easier to compare CI products. New features include additional providers whose policies can now be compared historically, and now featuring while label CI policies such as Tesco.
• PruProtect will be launching a consumer protection campaign to increase awareness of the need for protection insurance and its proposition.
• Cancer is generally the most claimed for condition under critical illness cover. Aviva statistics released show 66% of its critical illness claims are for cancer.
• FCA chief Martin Wheatley has struggled to answer Treasury Select Committee concerns about how the FCA is drawing a distinction between advised and non-advised internet sales. While he failed to give a clear answer, Wheatley admitted the FCA had reason to revise its current guidance as consumers are at risk of being mislead.
• Just Retirement has launched an immediate needs annuity to cover the cost of long-term care. The Care Funding Plan provides a regular income - usually paid directly to a care provider such as a residential home, rendering it tax-free.
• Lloyds banking group has increased its provision for PPI mis-selling complaints by another £1.8bn, bringing the total to almost £10bn. The bank said the increased provision reflected a greater number of successful complaints.
• LV= announced a slight decrease in protection sales in 2013, compared to the previous year. Sales totalled £29 million in 2013, compared to £32 million in the previous year.
• Protection intermediary LifeSearch has announced the short list for its annual protection awards, with Aviva, LV= and PruProtect leading the nominations.
• Zurich has announced its 2013 critical illness claims statistics, paying out on 94% of claims, up from 90% in 2012.

Kevin Carr is Chief Executive of Protection Review and MD of Carr Consulting & Communications.

This article first appeared in Mortgage Introducer