The latest Association of Mortgage Intermediaries (AMI) Protection Viewpoint shows that 39% of customers recall their broker talking about protection, a slight improvement on 36% in 2020.
However, around 20% said they cannot recall protection being mentioned by their broker and 30% said they neither asked their broker about protection nor did their broker talk to them about it.
The report said: “Since protection conversations aren’t resonating as strongly as we’d like, it’s clear we need to go further. Driving protection conversations around customer needs – not product – is essential. And we shouldn’t lose sight of the importance of emotive human-to-human connection as part of protection conversations.”
The report called on the industry to create a “cross-industry initiative” to raise consumer awareness, and for advice firms and advisers to “strengthen” how protection conversations are anchored around key life events to build a “clearer link” regarding the purpose of protection.
Self-employed advisers were more likely to have direct protection conversations with customers at 87%, compared to 70% of employed advisers.
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Only 13% of advisers said they introduced the concept of protection but passed it on to a specialist adviser within their firm, and this falls to 2% who refer it to a specialist external to their firm.
Mike Allison, director of protection at Paradigm, said: “We find the more successful firms start the protection conversation as an integral part of the mortgage discussion, which not only helps to understand budgeting for it, but serves to get the client engagement and the ‘buy in’ of the need early in the process.
“Advisers who tend to stay away from jargon such as ‘term’ and ‘income protection’ but use phrases such as ‘paying your mortgage lender if you are sick’ also help clients to engage better.”
Consumers confuse protection types
When asked to identify the policy type from a description, around 67% correctly identified critical illness.
However, only 38% and 35% could correctly identify accident, sickness and unemployment (ASU) protection and income protection respectively.
Around 42% thought the ASU policy description was income protection and 39% thought the income protection description related to ASU policies.
The AMI said this shows that there is a “need to focus on purpose, not product names, when discussing protection with consumers”.
“It also underscores the need to use language that connects with consumers and aids understanding on the role of different protection products,” it added.
Consumer understanding about protection is mixed
Looking at life insurance, 43% of those aged over 55 said they have a very good understanding of the product, followed by 37% of 18-34-year-olds and 30% of 35-54-year-olds.
Around half of people across all age demographics reported some understanding of life insurance, with 15% of those aged 18-34, 11% of 35-54-year-olds and 6% of over-55s reporting no understanding at all.
With critical illness, 25% of 18-34-year-olds had a very good understanding, followed by 22% of over-55s and 21% of 35-54-year-olds.
Approximately 52% of 18-34-year-olds said they had some understanding of critical illness, which compares to 60% and 61% of 35-54-year-olds and those over 55 respectively.
Nearly a quarter of those aged 18-34 said they had no understanding of critical illness, up from 19% of those aged 35-54 and 17% of those aged over 55.
Regarding income protection, 26% of 18-34-year-olds, 21% of 35-54-year-olds and 19% of over-55s reported a good understanding of the product.
Around half of those aged 18-34 and 35-54 reported some understanding, down from 61% of those 55-plus.
A quarter of those aged 18-34 and fifth of those aged 35-54 and 55-plus said they had no understanding of income protection at all.
