So, with approximately 27 million people currently employed in the UK, why do less than 2.5m have short or long-term income protection?
Although it is a vital part in the advice process, the industry continues to struggle to get across to consumers why income protection is so important. In reality, it is often not at the client’s front of mind that they need to protect themselves or indeed the loan. In fact, some consumers are even steering clear of income protection due to cost perceptions and a lack of product awareness. I therefore think that children should receive financial education in school from an early age, as the majority do not know about bank accounts when they leave school, let alone loans and mortgages.
The Seven Families Story which launched in October 2014 is a good example of why income protection should be a key priority. The campaign not only highlighted peoples’ financial vulnerability, but also helped to raise much needed awareness in the advisory community and emphasised the growing need to drive more income from each sale as the market has continued to tighten.
It is of course promising to see that income protection sales were up by more than 10% last year, but the industry must now focus on building on this legacy and the momentum that has been achieved. This can be accomplished by continuing to make mortgage brokers aware of their responsibility, moral obligation and professional duty to discuss income protection with their clients, because every customer should be offered the best products for the situation they find themselves in, without fail.
In addition, as a result of more and more entrants coming to the market, we should also tailor training to ensure advisers are also focusing on the protection side of things. It is clear that in order to effectively close the UK’s longstanding income protection gap, the industry must up the ante in terms of products and consumer engagement and education. I am confident that this will ultimately help to alter its previous reputation as well as old beliefs and perceptions around this form of protection.
Although the Seven Families Story campaign was a positive step, from an industry point of view, there is more that needs to be done to raise awareness of this vital protection cover. Moving forward, advisers, insurers and reinsurers alike must work collaboratively to create even more solutions for this very real and growing customer need. More specifically, it needs to work together to help better educate and engage consumers, clients and introducers through straightforward and transparent communication, because life happens and we must prepare for the unexpected and for the things that really matter.
There are currently some good income protection products in the market that can help to neutralise this risk and prevent so many people from having to unnecessarily gamble on their financial future. Mortgage brokers should see this as another opportunity to add real value to clients and to make a real difference to their lives.
