Jeff Woods is campaigns and propositions director at Sesame Bankhall Group
Over recent months we’ve been undertaking a large-scale insight project to gauge our understanding of the protection market from different viewpoints.
This work has included a research study with hundreds of advisers, along with detailed conversations with product providers, who in turn shared observations collected from customers.
I’d like to share some of the key take-aways from the study, starting with the customer’s point of view. Our study clearly highlighted the need for greater consumer education and awareness of protection. Furthermore, the reasons why consumers don’t currently seek out protection insurance provides a focus for this work.
Consumers continue to underestimate the risks of serious ill-health, whilst overestimating the cost of insuring against that risk. Lack of confidence in a claim being paid is a third important factor.
Taking each one in turn, it’s frustrating to see the continuing disconnect between the type of insurance customers purchase compared to what most people are most likely to actually need.
In opting for life insurance people understandably want to protect their families against the worst, but this doesn’t reflect the true risks when each year one million people in the UK find themselves unable to work for an extended period due to a serious illness or injury.
This brings us to the second big issue. Whilst we’re fortunate in the UK to have the NHS and benefits such as Statutory Sick Pay and Universal Credit, this can lull people into a false sense of security.
It can make some people feel like protection insurance isn’t required, which definitely isn’t the perception in other countries such as the USA and Australia.
In reality, the amounts available from UK benefits are very sobering for people to discover.
In most cases it would leave them living on the breadline, which can have an adverse effect on health and recovery. Furthermore, benefits are a notoriously difficult system to navigate, with payments often being either delayed or refused altogether.
This situation isn’t helped by the fact that most people who attempt to take action often bail out of the process.
Which brings us to certainty of claim. There seems to be a mythology around the difficulty of gaining pay outs in the protection industry. For many customers, discovering that the vast majority of claims are paid out is a big turning point for them in deciding to purchase.
This all goes to highlight and reinforce the value that advisers add to the protection process, and provides much food for thought.