The Association of Mortgage Intermediaries (AMI) has launched its third annual Viewpoint Report on protection within the mortgage industry – The Great Protection Shift.
It has concluded the report with a new five-point plan to work together as an industry towards change.
The report, produced in partnership with Legal & General and Royal London, asked 3,000 UK adults and over 250 advisers their views on issues relating to the protection market. New this year, AMI also carried out qualitative research involving a bespoke community of consumers to give extra depth to the findings.
The research looked at the barriers to protection, expectations among both consumers and advisers, the power of communication and the perceptions and misconceptions that exist.
35% of consumers perceive affordability as a barrier to protection, rising to 48% of those aged 35-44, while 30% of younger people (18-34 years) think they are “too young” for protection.
For a third year in a row, half of consumers (50%) believe commission is a broker’s main motivation if they suggested protection. 18% of consumers are not confident talking to their broker about their health, while just 48% of brokers are very confident talking to consumers about their physical and mental health as part of the protection journey.
If they were buying protection today, 56% of consumers would go online compared to just 27% who would want to buy it face-to-face and just 3% by a video call. Advisers think that lenders (84%), the regulator (84%), consumer groups (83%), government (79%) and their peers (86%) should be doing more to promote the importance of protection among consumers.
42% of advisers value quicker systems and processes most from protection providers, while three in 10 (29%) want access to underwriters and just 7% say they value training most.
On average, consumers think they could receive £123pw Statutory Sick Pay, rising to £153 among those aged 18-34, when in reality it pays just £99.35pw. While many self-employed are not eligible for SSP, on average they still believe they could get £95pw.
A fifth of protected consumers (19%) have never reviewed their policies, rising to a quarter (24%) of women, and a third (35%) of people who used a broker have had no contact again since the initial meeting. 67% of advisers share personal stories with clients when advising on protection and 52% use insurer sales aid and tools, while 35% utilise insurer claims stats.
20% of consumers said they did not discuss life insurance with their broker, rising to one in four for income protection (28%) and critical illness (25%), while a quarter of consumers didn’t discuss with their broker their ability to pay the mortgage if they fell ill/injured (23%) or if they were to die (26%).
Meanwhile, 44% of advisers expect the Consumer Duty to increase the focus on protection.
For three consecutive years, over half (56% in 2022) of consumers don’t trust insurer claims stats, rising among older people, and on average believe just 72% of life insurance and 60% of income protection claims are paid.
52% of those consumers with a protection policy are aware of the added-value benefits and a fifth (20%) have used them. Almost a third (31%) of consumers mistakenly think they can’t get IP if they’re self-employed, rising to 42% of those aged 18-34, while two-fifths of consumers (43%) think protection cover is always the same whether purchased through an intermediary or directly.
34% of consumers believe they can’t get IP if they’ve suffered from a mental health condition, rising to 40% of those aged 18-34.
Robert Sinclair (pictured), chief executive of the Association of Mortgage Intermediaries, said: “Against the current economic challenges, it’s never been more important to help consumers understand the vital role of protection and the benefits of advice.
“Now in its third year, this year’s Viewpoint brings new insight, delves deeper into views uncovered in previous years and highlights recurring trends. While we hope this report provokes active debate at both an industry and firm level, we also want it to bring the industry together, to take stock of what’s working well and what isn’t and result in action. This is why we have decided to introduce a five-point plan as a call to action to kickstart the ‘Great Protection Shift’.
“AMI plan to work with its Protection Specialists Group and in collaboration with the ABI, PDG, IPTF, our insurer partners, Legal & General and Royal London and the wider industry, to champion change. Let’s work together as one industry, as together we can shift the dial.”
Carrie Johnson, customer life stage director – protection, Royal London, added: “As life gets more expensive, people are having to make difficult choices about their monthly outgoings and protection insurance may not seem to be an essential cost. Providers and advisers have a responsibility to continue to help people understand the benefits of having cover in place and the financial security it provides if they were to face a life shock.
“As an industry there is more to do to address the recurring issues around lack of trust in claims statistics, poor customer understanding of income protection, and the fact that the vast majority of consumers think life insurance is important but only the minority have it.”
Julie Godley, director of intermediary at Legal & General, concluded: “As the cost-of-living crisis continues to bite and people focus on getting by day to day, it’s easy for them to underestimate the value of their long-term protection. Protection can be hard to justify, but it can be a financial lifeline to cover essential living costs like mortgage payments or even food.
“Life cover is no substitute for the loss of a life, but it does protect families from an incredibly difficult additional financial burden. As an industry we must continue to help people understand the essential benefits of having cover and the financial security it provides and address the misconceptions surrounding these vital products.”
