Royal London

Attitudes toward income protection

Ross Jackson

Senior Protection Marketing Manager

Royal London commissioned Opinium to run our State of the Protection Nation research to find out how people felt about their own protection needs and the industry as a whole.

We surveyed people who had already taken out some kind of protection insurance and those who didn’t have any. We also asked advisers to find out how they felt about their own protection needs, and the challenges they face selling it.

Here’s an extract from the full State of the Protection Nation report March 2017

I don’t need income protection

Income protection has the lowest ownership of all the covers we asked consumers about. Overall, just 4% of adults owned an income protection policy compared to 6% with critical illness and 26% with life insurance.

Interestingly, the pattern is reflected in the adviser community too. The overall numbers are higher but, when asked, just under two fifths (38%) of advisers had income protection, three fifths (62%) had some form of critical illness cover and 88% had life cover.

This low ownership by consumers is reflected by the fact that almost half (44%) of UK adults believe they don’t have a need for income protection at all. Again, age influences opinion with 73% of those aged 55+ saying they had no need for income protection at all, compared to 31% of 35-54 year olds and 22% of 18-34 year olds.

It’s interesting to see that the younger generations feel a much stronger need for income protection. Are these younger age groups more aware than those aged 55+ of the higher risk of becoming ill for a long period during their working life? If so, what are their barriers to the sale? Perhaps we need to change our approach to the way we both design and sell income protection to make it more attractive to the younger age group. It can be difficult to get customers to talk about protection alone, so should we be trying to catch them when they’re discussing other financial matters? Perhaps we can encourage consumers to consider income protection when they’re arranging their pension through auto-enrolment?

We’ve already seen that figures show more people are reluctant to buy protection than are open to the purchase. 44% feel they don’t need income protection at all, and just 4% claim to have a strong need. This pattern applies right across the board, regardless of gender, age, geographic location, past redundancy, or the number of dependants the person has. We know customer objections have always been one of the bigger hurdles to overcome when selling protection and these statistics reflect that hasn’t changed.

But those in employment should consider buying it

Despite the strong belief that individuals don’t need income protection, almost one in five (17%) agreed everyone in employment should consider buying it. This contradictory statement perhaps shows that individuals understand the concept of income protection, even if they don’t believe they could benefit from having the cover themselves. Perhaps the products are too complicated and, while the theory of protecting your income if unable to work is understood, the number of options and perceived complexity of the application process just turns people off.

Further investigation shows that almost 81% of those with income protection come from the ABC1 social grades. This means that those classed as having managerial, supervisory or professional roles are most likely to have protected their income. The remaining 19% come from skilled or manual professions.

This, in itself, is interesting. Are income protection products too focussed on white collar workers, or do these products not have enough visibility or ease of access for skilled and manual professions?

52% of those without income protection don’t own it because they see it as too expensive, they don’t see the benefit of owning it, or they don’t trust the provider to pay out in the event of a claim. Again, these objections have long been seen as common hurdles to selling all protection, not just income protection.

When we asked advisers, one quarter (25%) agreed that it’s becoming increasingly difficult to sell income protection, with 38% saying they had sold less in the last 12 months than in the previous year. 12% of those who will continue selling are expecting to make less sales in the next year, with 2% stopping selling income protection altogether.

You can download our State of the Protection Nation report to read more about the survey results.

Share article