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Life insurance is essential but are protection products providing an adequate solution?

By Sarah Scott, marketing consultant

Royal London commissioned Opinium to run our State of the Protection Nation research to find out how people felt about their own protection needs and the industry as a whole.

We surveyed people who had already taken out some kind of protection insurance and those who didn’t have any. We also asked advisers how they felt about their own protection needs, and the challenges they faced selling it.

Here’s an extract from the full State of the Protection Nation report.

Does everyone need protection?

Almost half (47 per cent) of all consumers in the survey say life insurance is essential for anyone with a mortgage or dependants. The research revealed differences across the age ranges with 58 per cent of those aged 55+ believing that life insurance is essential if you have a mortgage or dependants, but just 37 per cent of 18- to 34-year-olds feeling the same. This might simply reflect that the older age groups have experienced some financial shocks in their lifetime through either ill health or loss of income, or perhaps they are more aware of their own mortality.

What’s consistent across these age groups is recognising a need for protection cover doesn’t necessarily translate into an action to buy.

A quarter of UK adults we surveyed have a life insurance policy (26 per cent), but just 6 per cent have critical illness cover and 4 per cent have income protection. Perhaps unsurprisingly, those with children under 18 are more likely to have all types of cover than those without, as shown below:

  • Income protection (with children 8 per cent vs 2 per cent without)
  • Critical illness (with children 11 per cent vs 4 per cent without)
  • Life insurance (with children 35 per cent vs 22 per cent without)

Despite these objections from consumers, one fifth of advisers (21 per cent) had seen an increase in the amount of life insurance they had sold in the past 12 months compared to the previous year.

Are the products available suitable for customers’ needs?

Despite the perception that life insurance is essential at certain life stages, consumer confidence in the ability of protection products to provide a solution to individual needs is low. This is particularly apparent in the 55+ age group where over half (53 per cent) disagree with the statement ‘protection insurance products provide a real and genuine solution to my needs’.

Despite this lack of confidence, those in the 55+ age group were the most likely to have life cover (30 per cent). Perhaps the uncertainty of those aged over 55 lies more with other covers as they were also the least likely to own any critical illness cover (3 per cent) or income protection (1 per cent).

As life insurance is usually the most straightforward of protection covers, perhaps a lack of understanding of the benefits of other covers could be the barrier that prevents further purchases.

For the other age groups, confidence in the ability of protection products to provide a solution to individual needs is slightly higher, but far from ideal. Almost one in three (29 per cent) 35- to 54-year-olds don’t believe that protection insurance offers a solution to their needs compared to almost one in six (18 per cent) 18- to 34-year-olds. This suggests that younger generations are more open to the idea that protection could provide a solution to some of their financial needs, but that we have some work to do to engage with this group.

By comparison, just 3 per cent of advisers feel that protection products are failing to provide a real and genuine solution to customers’ needs. This is a huge discrepancy that perhaps reinforces something we already know – that more consumer education around the benefits of protection cover is needed.

You can download our State of the Protection Nation report to read more about the survey results.

Source: State of the Protection Nation, March 2017, Royal London.  2,000 nationally representative adults (18+) surveyed.

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