No matter how good an adviser is, they will still often face a set of objections when it comes to protection, many of which seem to have changed very little over time.
In a bid to understand the main grievances, London & Country recently carried out a survey of some clients that do not take protection. Awareness of cover was good but many of the classic objections were still in use, despite their validity and strength being increasingly questionable. They included the following:
I am covered by my employer
We were staggered to find that 39 per cent of respondents believed they were adequately covered by their employer.
Employer cover can be valuable but may often fall short of offering enough protection to cover a mortgage, debts and ongoing family provision.
It is vital to encourage clients to check their employee handbook or speak to their HR department to obtain more details so that the value of the scheme can be assessed. Many may not understand the type or amount of cover provided, knowing only that they have something in place.
Small print also needs to be checked, particularly for part-time or contract workers. A recent press article reported how a locum doctor was not eligible for a death-in-service payment because they had not been scheduled to work on the day that they passed away.
With a fast-moving employment market, will the client even be with the same employer and in receipt of the same benefits in two or three years’ time?
As a result of the Mortgage Market Review, mortgage advisers are constantly assessing affordability; and, of course, cost is a crucial part of recommending a protection package. Given that clients’ expenditure is a focus of the mortgage conversation, we should be well placed to present a recommendation that not only meets all requirements but is affordable and sustainable for the client.
Letting clients know how cost-effective cover can be is a good starting point.
A survey carried out earlier this year for Sun Life found that nearly half (48 per cent) of those questioned gave cost as the main reason for not taking protection. They estimated the cost of £100,000-worth of cover would be in excess of £50 a month.
In fact, a 30-year-old could take a £100,000 term assurance policy for £6 to £7 a month – a fraction of the average £25 a month that UK dog owners pay for pet insurance. It is therefore crucial that we make customers understand both the value of protection policies and how affordable they can be.
It will not pay out
The public mistrust in the insurance industry unfortunately still exists and was only heightened by PPI misselling. Press articles highlighting cases where a claim has been declined can undermine confidence in policy benefits.
The annual reporting of provider claim statistics gives some genuine insight and helps to demonstrate that actually these policies do pay out and make a huge difference to people’s lives.
In 2014, Aviva reported that successful critical illness claims were above 93 per cent, with L&G only slightly behind at over 92 per cent. Both were over 93 per cent in the amount of income protection claims they paid.
It should also offer further peace of mind that providers are making changes to contracts that should make it both easier to claim and more likely to receive a payout, even for less advanced illnesses.
The state will provide
While this was not a big reason cited by L&C clients for not taking protection, it is still used as a fallback by some. This is worrying at a time when state benefits are being reduced and would go nowhere near covering basic living costs, never mind the average person’s commitments.
At present, if you are in receipt of Employment Support Allowance, you receive just over £100 a week. Given that the Office for National Statistics reported in December 2014 that the average household had weekly expenditure in excess of £500, this would create a huge shortfall, particularly if the main earner was affected.
In the main Budget this year, there were also two major changes to Support for Mortgage Interest. From 2018, it will be provided as a loan payment rather than as a benefit. As a result, there will be a requirement to repay the amount received plus interest on returning to work or when the house is sold.
From 2016 the waiting period for eligible claimants is set to increase back to 39 weeks from the current 13. Having to wait three times as long will only put a greater strain on mortgage-holders’ finances and potentially increase the risk of losing the home.
It will not happen to me
Most of us know someone who has been affected by death or illness, which can have a major financial impact on both them and their family.
With Cancer Research reporting that 1 in 2 people in the UK born after 1960 will be diagnosed with some form of cancer during their lifetime, to assume ‘It won’t happen to me’ is, unfortunately, tantamount to burying your head in the sand.
It is not just the older generation that is affected by serious illness and death. Cancer Research also reports that 1 in 20 women and 1 in 35 men are at risk of developing cancer before the age of 50.
This is supported by Royal London claims statistics for the past year, when 35 per cent of its CI claims were made by people under 45 and the average age of people claiming for cancer was 48.
Of course, it is an adviser’s job to overcome these objections and there are many ways to highlight why they will not be valid for the majority of clients.
The real key is to unearth the benefits of taking the policy rather than simply knock down their objections.
A customer who ultimately understands the need for protection, within their budget, will have hopefully already eliminated any preconceived objections.