Recent weeks have seen a succession of large insurers publish their claims stats for 2021, including the likes of Royal London and Scottish Widows, while the Association of British Insurers (ABI) has published data for the industry as a whole.
According to the ABI, for example, 98 per cent of claims were paid out with almost 300,000 new claims paid out across the year. Claims for issues related to the pandemic almost doubled on the year before, the trade body’s statistics showed.
And while some brokers told Mortgage Solutions that these claims figures help them overcome client cynicism, they argued that there are other barriers holding back a wider adoption of cover such as ignorance over what’s included, whether they really need protection, and the likely cost.
Dispelling myths
Dominik Lipnicki, director of Your Mortgage Decisions, said that there is a “huge misconception” that protection policies do not pay out, but it is a broker’s duty to show that successful claims are the norm.
He noted that inflation and higher taxes are putting budgets under pressure, which may tempt clients into ditching their cover. However, he added: “As an industry we must keep in regular contact with clients, ensuring that they are protected within their budget and requirements and if those change, so should our advice.”
Bradley Brandon-Cross, director of Commercial and General, said that claims data helped dispel myths around protection cover, noting that in the current climate it was crucial to educate clients about the benefits of insurance.
He said: “We don’t want people to be underinsured because they are trying to cut costs and mistakenly believe that their policy wouldn’t pay out anyway.”
What is covered?
Imogen Sporle, head of term finance at Finanze, said that scepticism around protection products is common among clients, but suggested that it’s not claims data that helps overcome this opposition.
She explained: “Rather than using facts and figures on how much has been paid out by an insurer, I find it’s more beneficial to focus on the amount of illnesses and circumstances they pay out for. This gives the clients confidence that they do not need to have a super specific terminal illness in order to have the life insurance pay out.”
Protection has always had to be ‘sold’, according to Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, who argued that it can be difficult to shift the attitude of clients that ‘it’s never going to happen to me’.
She added: “It amazes me that people are happy to spend money insuring their mobile phone but are not particularly interested in insuring their income.”
King also pointed out that she has always used provider stats to demonstrate that if all relevant information is properly disclosed by the client, there is no reason why a claim would not be paid out.
“The difficulty is persuading people that protection is a benefit worth having.”
Justifying saying no
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, suggested that all too often the apparent scepticism over payouts is simply an excuse from clients in order to justify taking the risk of not protecting their family and home.
He noted that insurers have released claims data for years now, yet clients simply choose not to believe them, adding: “Having claims figures published by more independent bodies, such as the ABI and the FCA would likely help to give the figures more credibility in the eyes of a cynical public.”
Lewis Shaw, founder of Shaw Financial Services, said that claims stats were helpful to counter client suggestions that policies do not pay out “which we all know is nonsense”.
However, he emphasised that ultimately it’s down to a client’s emotions whether they opt for a protection policy.
He added: “In the main, the only people that say life insurance doesn’t pay out are the ones that want a way of saying ‘I don’t want to pay for it because I don’t think I’ll need it, but I don’t have a compelling enough reason to say no to it’.”
Highlighting additional benefits
Barr noted that what claim stats rarely highlight is the fact that policies often come with a host of additional non-financial support services, such as counselling and bereavement services, free legal help and even CV writing.
He continued: “The level of help and assistance a good insurance plan can deliver at the time you most need it is very underrated.”
Lipnicki added that in the past, too many protection policies were bought on price alone, with that “race to the bottom” meaning that clients may not have received the protection they needed.
“The plans available now are better and more innovative than ever. Value rather than the monthly price alone is where sound advice should sit,” he concluded.
Everyone can afford protection
Some brokers may have come across clients who point to the cost of living situation as a reason why they cannot take out a protection policy.
However, this idea was given short shrift by Shaw, who suggested that if a client cannot afford £40-£80 a month for a protection policy, then “in my mind they can’t afford the mortgage”.
He continued: “After all, most can afford a takeaway, a TV package, some new trainers, etc. It’s about prioritising the right things ahead of the wrong things.”
King agreed with this point, adding: “I think there is also a myth that it is expensive when for many the price of a couple of takeaways a month would go a long way to providing them with some financial protection in the event of long term sickness.”
Are attitudes towards protection changing?
Sporle suggested that the attitude towards protection has actually improved since the pandemic, with increasing numbers having seen the impact on their finances of being too unwell to work.
She added: “Although the cost of living has risen, I still find the clients are now happier to earmark earnings for this safety net.”
Brandon-Cross agreed that the pandemic had helped “embed the message” that it’s important to plan ahead for the unexpected.
“We may not want to talk about it but the data on successful claims helps advisers to showcase why it is a conversation worth having,” he added.
