What’s the news in protection? On the surface you could be forgiven for thinking there isn’t anything new, that protection is still generally being overlooked and undervalued.
Figures from our State of the Protection Nation report show that protection take-up is still worryingly low - just 35% of people have life insurance, 12% have critical illness cover and 9% have income protection.1
And while more people with a mortgage have taken out protection, the numbers are still nowhere near where they should be - 40% have no life cover, 71% have no critical illness cover and 81% have no income protection.1
And yet many consumers recognise that it would be beneficial to have some cover in place.1
There are a lot of people who don’t have protection who probably should. Especially if they’re already talking to a financial adviser. But converting those thoughts into action is still proving difficult.
So it’s hardly surprising that when we asked advisers what they thought - 72% agreed that the protection gap is increasing.2
Particularly, it seems, when it comes to income protection which nine in 10 financial advisers believe is hugely undersold. And they put that down to a number of reasons such as a lack of awareness among clients, the products being too expensive or an overreliance on government support.2
But it’s not all doom and gloom and there’s more going on than these figures suggest. Beyond these statistics, there’s some proof of a shift in attitude from some consumers, which could provide advisers with some positive news and unexpected opportunities.
And that’s mainly down to how society is changing.
Take the much talked about ‘gig economy’
The gig economy – the popularity of short-term contracts or freelance work, as opposed to permanent jobs – has been criticised for contributing to low pay, insecurity, and poor working conditions. But for many people it provides an opportunity to structure their work flexibly around their lives to suit them.
And it’s a booming economy. The UK is now home to an estimated five million self-employed people – 15% of all UK employees.3
We’re not just talking about Uber drivers and Deliveroo couriers. In fact just under 30% of gig workers are professionals working in the accounting or legal industries.4
The gig economy worker profile also isn’t what you’d think. Since 2001, the number of self-employed workers aged 65 and above has nearly tripled and it would appear young people are keen to become their own bosses - with the number of self-employed workers aged 16 - 24 nearly doubling over the same period.3
The more people are inclined to work on a self-employed basis, without employer benefits like occupational sick pay, the more they need protection.
The good news is that the possibilities within this growing market are being recognised by advisers - 28% agreed that the gig economy provides them with a new opportunity.2
The youth of today
Millennials often get talked about as a breed of consumer that’s very different to the types of clients advisers are used to dealing with. Of course every generation has its own trends and behaviours. We’re a product of our environments after all. But are the youth of today altogether different?
74% of financial advisers believe that young consumers are addressing their protection needs too late, and 43% say they are struggling to attract clients under 35.2 Unfortunately, younger people don’t recognise that they could get cheaper cover if they had the protection conversation earlier.
And yet almost three quarters of 18-34 year olds who bought cover through an adviser say they have an ongoing relationship with them. That’s compared to around 45% of 35-54 year olds and those aged 55 or over.1
Clearly there’s a huge number of younger clients who are looking for guidance, which goes against the theory that they’re happy to do everything themselves online. And if advisers could get them through the door, they could have a loyal client for life.
The problem of increased life expectancy
Average life expectancy is going up, partly due to better health care, which means we’re able to survive diseases that previously killed us. But that also means we’re now living longer with critical or chronic illnesses, which naturally puts a strain on our survival.
This isn’t something many people think about. 71% of people with a mortgage have no protection in place if they were diagnosed with a critical illness.1 Unless they’ve built up substantial savings, how would these people expect to replace their income after a cancer diagnosis, heart attack or stroke?
It’s clear we need to work harder to make people realise not only the benefits of protection, but the long-term outcome for their family and themselves if they become seriously ill.
Clearly the old objections remain – people see protection as too expensive or think it will ‘never happen to them’. But if we look closer at the way society is changing, we can see there are more opportunities for the protection conversation than there used to be – this time it’s a question of looking more closely at client demographics to find the opportunity.
1 State of the Protection nation, Royal London, May 2018
2 Royal London adviser polling, November 2018
3 Trends in self-employment in the UK, www.ons.gov.uk, February 2018
4 Truth about the gig economy: our younger generation will demand a flexible future, www.fenews.co.uk, August 2018