A report released today from The Syndicate, a research arm of UK protection insurance consultancy Protection Review, shows that a third (33%) of people without cover view protection insurance as a luxury they can’t afford.
When asked why they hadn’t taken out any financial protection, over a quarter of those without cover (27%) said they did not want to pay money into something that may not be needed; a fifth (19%) said they didn’t think they needed protection; while another 19% didn’t trust the insurer to pay out, showing the continued work that’s needed to reach consumers with the importance of protection and the high number of claims paid.
When asking policyholders whether they had been contacted by their insurer in the past two years, two-thirds (65%) said they had not heard from them. But of this group, over three quarters (77%) were happy not to have been contacted, preferring to forget about their purchase, posing a real challenge for insurers.
Source for chart above: The Syndicate
However, 41% of the youngest age group (18 to 25 year-olds) said they would like to have heard from their insurer, preferably by email, showing encouraging signs that a preference for a lack of communication could reverse long-term.
In general, The Syndicate said the younger generation are more trusting of insurers and more open to being contacted about offers relevant to them.
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When people were asked about the process of buying protection, the majority (32%) couldn’t remember how they had researched their protection cover, and a significant proportion of people had also forgotten where they had bought it from (17%).
Comparison websites are the most popular research tool (23%), but fell behind buying from insurers directly (28%), banks and building societies (16%) and brokers and advisers (15%) for actually purchasing cover, at 13%.
The Syndicate research showed a degree of scepticism for professional advice.
Overall, 42% felt that advice was not a necessary part of the buying process however, a third (32%) suggested that it was important when buying protection. Almost a quarter said they believed professional advice could ensure they got the right level of insurance, but that left over half (58%) not convinced that advice offered this benefit.
When looking at advice of a different kind, over half (55%) said they would not trust robo-advice, with just a quarter (25%) agreeing they would.
When speaking to advisers about their view on the value they most add, 71% said it was to ensure clients had the best product to suit their needs, 56% believed it was to educate and help clients understand the protection benefits, and 36% said it was to offer peace of mind and confidence in the protection purchase.
The majority of advisers (51%) believe that a client’s protection needs should be reviewed at least every three years.
Peter Le Beau, of The Syndicate commented: "It appears that insurance largely remains a grudge purchase for many and the majority are indifferent to the subject completely. As an industry we are not focused enough on reminding people of the value of protection. By neglecting value, we allow consumers to focus on price. This rationale also allows those who don’t trust insurers and believe that claims will not be paid to justify not purchasing cover."
Le Beau added: "There are a number of areas for concern highlighted in this report but there is also positivity in terms of opportunities for the future. We see a younger generation emerging who are not as cynical about protection insurance, who are not as financially savvy but who want contact with their insurer. The industry must seize the opportunity that this generation presents if the story of protection insurance is to find a happy ending."
‘Need to improve awareness’
Emma Thomson, head of customer care at LifeSearch added: "Insurers need to invest in widespread marketing campaigns to improve awareness, and distributors (both advised and non-advised), must do much more to promote the benefits of protection to their clients."
In Thomson’s view, more needs to be done to support existing customers too.
She said: "Ancillary benefits that clients can use without having to claim, would make cover feel more valuable. Improved communications with customers, reminding them what cover they have – for example through annual statements – is also needed to ensure clients don’t cancel, make them feel valued and most importantly, ensure they don’t miss out on being able to make a claim."