For some, protection can seem like the great unmentionable with clients. For every advisory practice that has eye-wateringly good protection penetration rates, there will be one that is reticent about making the case too strongly, for fear perhaps that they somehow derail the mortgage.
Perhaps such an experience has clouded their protection worldview, or they don’t have the requisite data/statistics and experience to be able to present the arguments for protection take-up strongly enough in order to counter the obvious push-back that clients often come with:
- ‘We can’t afford it at the moment’.
- ‘I’ve heard these policies don’t pay out anyway.’
- ‘My job is secure.’
- ‘My health is fine.’
- ‘It seems like a waste of money.’
There is of course a strong level of emotion on display when it comes to discussing protection, and it is often a consideration of family circumstances and potential changes that will ultimately lead clients to a point where they understand their own need, the difficulty they could have without protection, and what it could mean in the future to be able to claim upon a policy.
However, for some it can be an outline of the cold, hard statistics which makes the case for protection more compelling. So, just recently, the ABI and Group Risk Development revealed that the protection industry paid 98.4% of all claims in 2019, going against that perception that insurers never pay out.
And recent research from HSBC Life UK outlines the discrepancy between life insurance take-up and income protection. There are 26.5 million households in the UK – in 2018, 5.4 million had life insurance but only 200,000 had any form of income protection. Given what the country, and many families, are currently going through, there is a clear need to make protection more of a non-negotiable than it currently is.
For advisers, it is therefore all about making the case for why protection is so important, especially when clients may only have their eyes on the prize of a house purchase, and may be thinking this is a consideration they can put off until later.
If Covid-19 has taught us anything it’s that life can come at you fast – how many of us anticipated just how devastating the impact of this virus would be on our daily lives, let alone the wider economic impact?
There will be hundreds of thousands of people, perhaps currently still on furlough, who never believed their jobs and livelihoods were under any sort of threat at the start of the year, who are now having to face up to a much starker reality. The HSBC Life UK research also outlines which client demographics may now be in most need of protection advice – 53% believe parents with smaller children will have the biggest need, 43% said those starting a family, plus 45% said that employees with limited access to employee benefits, the self-employed (39%), small business owners (37%) and gig economy workers (32%) would all have greater protection requirements in this ‘new normal’.
My own view is that there is unlikely to be a client that doesn’t have a protection need; however if advisers do want to take a more targeted approach, then it would seem sensible to concentrate their efforts on those different client groupings mentioned above.
There would seem to be no better time than the present to not just look at the protection needs of new clients, but to revisit those of existing ones too. How many of those clients will have seen their circumstances change in the past three to four months? How many might be anticipating further changes as we move through 2020 and beyond? This is something we have supported and urged our ARs to do since the beginning of this current pandemic, as having these conversations right now could provide the necessary peace of mind for them and are likely to bind them ever closer to you as their adviser.
Armed with the detail and the statistics to back up advice, advisers should be able to make a truly compelling case for protection, providing the right policies and also growing the income base of the business. We must all ask ourselves the question – if not now, then when?
Rob Clifford is chief executive of Stonebridge