The beginning of the year is a great time to renew contact with clients and remind them of the products and services suitable for their situations.
With this in mind, we recently asked consumers what they believe are the most important financial steps they could make in 2012. The standout areas people said were: to cut back on spending as much as possible, to pay off their debts, and to review all their finances to ensure they are getting the best deals possible.
More people are preparing to plan for their holiday and check their energy supplier is offering competitive prices than are planning to buy life insurance.
This would be fine if most families already had a life insurance policy in place, but the research reported just 40% of families say they already have an existing policy.
In addition, just 13% say they have critical illness cover and just 10% say they have an income protection policy.
With an estimated 84% of the UK population living as part of a family, three-quarters of whom have one child or more and two-thirds of whom own their own home (either with a mortgage or outright), these figures are worryingly low.
That they are so low is even more confusing as a fifth say they worry about the possibility that either they, their partner or their children will contract a serious illness in the next six months and a quarter are worried it could happen within the next five years.
Disconnect
Why is there such a disconnect between the level of concern about serious illness and mortality and the low number of protection policies in place?
The research showed just how uncomfortable people feel discussing their personal circumstances and how it could affect their finances. It found more than a quarter admitted to being uncomfortable discussing their debts and borrowing with their wider family, and 14% would be uncomfortable discussing the topic of their will.
This represents both a challenge and an opportunity for advisers.
If people are uncomfortable discussing the financial implications of serious illness or worse for a member of their family, with their family, then what hope do advisers have?
However, it is precisely this reason that talking to a adviser could be of real value.
Anecdotal evidence indicates people usually say they do not buy non-mandatory insurances because they cannot afford them.
And when asked why they do not have these products, to a certain extent Aviva’s research corroborated this: 19% said they did not think they could afford life insurance, with 24% saying this was why they did not have income protection and 23% citing it as the reason why they did not have a critical illness policy.
Nevertheless, until they have a discussion about them, people do not realise these products often do not cost as much as they think they do.
In many cases, they can usually be tailored so they meet different personal circumstances, which can also bring costs down.
The line of reasoning around cost can often be overcome by an adviser sitting down with a client and going through monthly income and expenditure to see if they really cannot afford it.
However, if they genuinely are finding that increasing prices and the rise in the cost of living means they cannot afford them, then there is little that can be done.
Nevertheless, it was interesting to note that, when questioned, more people admitted that apathy and a lack of understanding were actually more of a barrier than cost.
The role of the adviser therefore is as critical as ever in ensuring clients understand and appreciate the financial risks they are taking for them and their family’s livelihood. The ‘what if’s’ need to be considered.
None of these reasons are necessarily insurmountable (compared to affordability) and – if these are the main barriers to entry for protection products – advisers are well placed to engage with clients and explain the benefits of them.
Traditionally, the main times people think about protection products are when they undertake a major life event, be this buying a house, having children, or changing job.
Yet, the beginning of the year is also the time when people revaluate their lives, so there can hardly be a better time to get back in touch with clients and discuss their protection needs.
