Protection products labelled “too complicated”

Ryan Bembridge

September 10, 2018

Protection products are overly complicated and no longer meet the needs of a modern workforce, a discussion paper from the Financial Services Consumer Panel said.

The statutory body said the benefits of income protection are “hidden behind complex choices and caveats in the small print” that put some advisers off from recommending it, while consumers end up thinking it’s poor value for money.

The panel said many of the products available have barely changed in the past 30 years and don’t effectively meet the needs of the growing contingent of self-employed people with irregular income in the UK.

The report suggested critical illness products are easier to understand, though it criticised products for failing to cover musculoskeletal and mental health problems, two common reasons people are off work on long-term sickness. Indeed, the panel recommended for providers to explore adding these to policies.

Sue Lewis, panel chair, said: “Protection products have not kept pace with the needs of today’s workforce.

“We hope the industry, regulators, and other stakeholders will join in the debate about how this market can be improved for consumers. More of the same is not an option.”

Mark Graves, managing director of Sesame Bankhall Group, backed the report’s findings.

He said: “I think this is pretty accurate.

“Advisers are the first barrier; if advisers believe in something it’s easier to sell it. Psychologically that’s the first step.

“Critical illness has moved and evolved a lot more than income protection, which has barely changed in the last 30 years.”

Graves believes that protection is lower risk when sold with a house purchase – and it therefore it should be easier to take out a policy in that situation. In other situations people may want to take out protection policies when worried about their job or their health, meaning they could be higher risk.

He added: “More needs to be done simplifying the product on the housemove because there is less risk.

“In some situations when people ask for income protection it’s because they are concerned – for example people who worked at Woolworths before it closed.

“When someone moves house they are not going to take on that added commitment if they think they are going to be ill; they are not hiding an illness.”

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