Alarmingly, most people continue to run the risk of life shocks without having an appropriate back up plan to help them cope financially, practically or emotionally. In Royal London’s State of the Protection Nation research, we measure consumer awareness and confidence in protection insurance. We’ve found that there’s still some way to go in dispelling the myths that protection isn’t essential, is too expensive and that insurers won’t pay out.
Protection insurance is all about de-risking life; being there when life throws you a curve ball. It’s difficult to get these messages out, but thank goodness for advisers like you who raise awareness of protection and encourage clients to get covered.
HOW TO MANAGE THE PROTECTION CONVERSATION
Providers supply lots of marketing material and tools to help advisers demonstrate the value of protection. Using case studies to support a protection conversation can help illustrate the benefits for customers who have claimed, as well as positioning the potential impact of not having cover in place.
Customers told us that they expected to be more likely to die in their working lives than to be off work sick for more than three months. The reality is actually the opposite: illness and injury are far more likely than sudden, early death.*
More than half of people could manage for no more than six months if they were sick and unable to work. Of them, 22% would only be able to last one month.* Protection is all about covering the everyday risks we run in our lives. It can provide some peace of mind so your clients don’t need to worry about their financial position should they be unable to work, get a serious illness or die. An added incentive with insurance these days is support services that can help a family cope with sickness and death.
And it doesn’t have to break the bank. When we asked customers to explain their reasons for not currently having protection in place more than a quarter said they thought it was too expensive.* But with the different options available these days, you can tailor cover to suit most budgets. With family income benefit on life or critical illness cover and limited payment periods on income protection, no-one should go without cover.
The outcome we want for all our customers is that if they need to claim, we can pay out, and usually that’s the case. We paid 99% of claims in 2018, totalling over £500m.** When we look at why certain claims aren’t paid, the reasons are largely people not being truthful about their past medical history and not meeting a policy definition. But this last one doesn’t mean it won’t pay out in future if an illness progresses. And an adviser who understands the importance of disclosure can make a real difference in helping the customer at the application stage.
WHEN TO HAVE THE PROTECTION CONVERSATION
It’s easy to let protection conversations end up taking place at the moment when major life events are in progress, for example buying a house or having a child.
Instead of trying to compete to be front of mind at such a busy time for the customer, some advisers’ business models introduce the idea of protection ahead of the event, or even revisit after it has happened. When your clients buy a house, disposable income will probably be restricted because they obviously want to achieve the maximum loan possible. So perhaps coming back to assess the level of protection once the dust has settled could help them take a sensible and realistic approach to making sure they cover their biggest risks, and manage them for the long term.
Our recent research has identified additional triggers for protection conversations, such as moving jobs, getting a salary increase, becoming self-employed or starting a business. Customers cite these examples as reasons they took out income protection in particular. Could we see advisers use these as an alternative way to start having conversations with their clients, or use them to review existing client cover? If conversations were more connected to careers could we see this leading to people getting cover earlier in life and benefiting from lower premiums?
At Royal London we’re committed to the protection market. Financial advisers are pivotal to people understanding the risks they face in life, and getting the right protection cover in place.
Sources – *Royal London State of the Protection Nation report, June 2019
** Royal London UK protection business claims paid (1 January to 31 December 2018).