Speaking with Mortgage Solutions, Phil Jeynes, director of corporate strategy at Reassured, said most first-time buyers did not consider protection as they presume the life circumstances which often require insurance do not apply to them.
Jeynes said: “Relatively young people who are first-time buyers, possibly don’t have a family, partner, or dependent. So, they’re thinking, ‘the risk here is that I die, and that will be very sad for everybody. But financially, nobody else is any worse off. So why do I need life insurance?’ And actually, that’s perfectly fair.
“But they probably don’t think about what happens if they get ill, or have an accident, which means they’re not able to work. For most people who are of working age, that’s far more likely – thankfully – than them dying prematurely.”
However, he also noted that leaving it too long to take out additional protection such as life insurance could be to the detriment of a client as they will have aged and potentially be given a higher premium.
Breaking it down
Jeynes said most first-time buyers were at their most stretched financially, so additional expenses like protection were not always of interest.
He also said the practice of presenting a “full suite” of protection options upfront and adding a premium of £100 a month to their expenses was the “right thing to do” but “completely unrealistic”.
He added: “It’s a way of saying, ‘I’ve looked at your needs, and here’s the Rolls Royce option, here’s what I have to recommend you have, because this sets you up for everything.
“’But let’s be realistic about it, there are ways that we can chunk this up. We can start you on something that covers the basics. And then we can review in a year’s time, two years’ time or five years’ time’.”
Jeynes suggested selling first-time buyers a basic level of protection, like income, then adding on to the policy to fit adapting situations. He said the inability to work because of illness was the most likely scenario for people getting on to the housing ladder so it usually was the most relevant type of protection.
He said increased flexibility in the protection market had enabled the tweaking of policies.
“Most insurers have flexibility built into their products that you can flex up and down. We were seeing a lot of people, particularly over the pandemic, who had to cut their outgoings for a period of time, because they weren’t working or earning as much as they were pre-pandemic,” he added.
He said many policies now allowed people to skip premiums and temporarily reduce cover.
Jeynes said: “It’s not a buy at once and done type policy anymore.”
Better communication
Jeynes said apathy towards protection and a lack of effective industry communication was affecting takeup.
He said the financial services sector hadn’t been “brilliant at communicating with young people about this type of issue”.
Jeynes also said the idea that millennials were a self-centred group who wasted money on expensive coffees and avocado on toast was a cliché and made the sector sound old.
“The oldest millennials are in their 40s. So, you’re not talking about these young whippersnappers that are a completely different generation. We talk in big generalisations, and we don’t really connect well with the younger demographic on the whole.
“So, I think we can do much more to speak sensibly to people and put things in their language,” he said.
He said the best thing a mortgage broker could do was introduce the concept of protection early on in the advice process.
Jeynes added: “I think the mistake a lot of mortgage brokers make is they deal with the pressing need, which is the mortgage, and then only talk about protection right at the end once the mortgage has gone through. Therefore, it feels and sounds a bit like an afterthought.”
He said this could also make protection feel like just an upsell to clients.
