Time for a sweeping statement. Protection isn’t what clients want.
It’s what they need, but not what they want.
Why do I think this? If 30 million people need life insurance, critical illness or income protection and only 100,000 people buy it each year what is the industry doing wrong?
Most protection industry experts say it’s because consumers need to be educated. Indeed a recent set of research from newly set up protection body The Syndicate found that more than 40% of people had never thought of buying critical illness or income protection.
But I want to float a different idea. People buy homes not mortgages. Why shouldn’t the same be true of protection?
Selling protection is about showing a client why they need it – so say many of the great and good in the industry to brokers trying to improve their penetration rates.
But I’m not convinced that works for everyone. Protection providers are still churning out products that fit the customer’s perceived need. Not products that cover what they want to cover.
I recently spoke to someone who said he didn’t want life cover but he did want to know that should he stop being able to pay off his parents’ mortgage they wouldn’t lose their home.
Essentially he wanted a whack of cash that would pay out to support that isolated bit of his life if things derailed.
Other research has shown that regardless of income bracket people worry that they won’t be able to keep their kids in private education if something happened to one parent.
The way they plan to deal with the fallout is to sell a car or remortgage their house to pay the school fees.
But why not have a protection product that protects that isolated part of someone’s outgoings rather than the whole of their income?
People don’t want to protect “life” – it’s too abstract. They do want to protect certain bits of their life like their car, their holiday, their children’s educations.
People are prepared to tighten their belts on some things like shopping in Lidl instead of Waitrose and driving a Renault Clio instead of the BMW. There are others they don’t want to have to economise on.
Why has the protection industry not developed products that reflect this? And why is the industry so wedded to life and income protection? It is introverted and fails to engage properly with consumer behaviour.
I will acknowledge one exceptions to this assertion. PruProtect has begun to innovate and design products that match consumer lifestyles.
Its policy designed to protect children’s education costs for example has identified and addressed a need that already exists in consumer behaviour.
But it doesn’t go far enough and it is still a niche designed to help advisers sell rather than specifically to address what customers desire.
With all the protection research and customer engagement that goes on it would be interesting to discover if people would buy life-sector specific products.
Perhaps the next time providers put their hands in their pockets they might consider asking them.