Phil Whitehouse, head of The Mortgage Alliance (TMA) sees plenty of opportunity in insurance and protection

It’s rapidly approaching that time of year when we can justify bringing a little excess into our lives. When it comes to consumer spending habits Christmas is certainly a time when we all tend to push the boat out somewhat but in order to do so, do we scrimp in other arguably more important areas?

It seems that the answer is a resounding yes. Indeed the UK is still not prioritising the importance of being fully insured for all types of scenario with the cost of protection cited as the main reason for not taking out products, closely followed by a lack of understanding. This is illustrated by statistics from Swiss Re who’s recent insurance report reveals that over 40% of consumers believe they do not need life or income protection insurance. In its latest study, the reinsurer found that 43% of respondents claim not to need life insurance and 40% believe likewise for income protection.

It’s also interesting to note the report shows that 65% of people would be very or fairly likely to seek independent financial advice to understand their needs better, with 55% of people saying they would pay for financial advice on savings. A further 87% expressed a preference for paying a one-off amount, with only 13% prepared to pay an amount based on hours spent.

These are all interesting points and it appears that, due to the financial crisis, consumers are now more aware that they will need to provide for themselves but are not doing so comprehensively enough. The problem is that consumers are still unsure about what kind of cover they need. It’s important for the industry to come forward and empower them with this information to accelerate the shift from better awareness towards making informed decisions to improve their financial protection. We need to ensure that consumers are taking greater responsibility for their future provision of protection needs as the pressures on the safety net provided by government intensifies.

Consequently, there has never been a better opportunity for intermediaries to engage with their clients. Especially in light of the vast numbers of consumers citing confusion as one of the major reasons for not taking out such important cover. This indicates that intermediaries should be doing more and getting closer to their clients new and old. So with this in mind, despite this somewhat negative anecdotal evidence, the protection market can provide the perfect opportunity for intermediaries in which to expand their offering.

As well as targeting new clients, intermediaries should also maximise the business potential of existing client banks. Costs of term assurance are getting cheaper so it may be possible to re-broke clients in simple term assurance cover and this is an area that could be explored immediately. Where people are underinsured there is inevitably opportunity for those that know the market and as importantly can actually sell the right product to the right person.

A follow up paper, also by Swiss RE, entitled The Cost of Doing Nothing, points to the UK’s increasing population, demographic shifts, increasing life spans and increased ill-health throughout life as having a dramatic effect on the lack of adequate protection and retirement planning.

The report found that 44% of consumers feel reasonably well positioned financially if they were to suffer long-term illness, disability or die. While people still perceive life insurance as the main way to protect themselves financially, just 36% believe they can actually rely in practice on holding adequate insurance. However, an increasing number of people think they are self-reliant.

The report warns that this unrealistic optimism makes people oblivious to the fact that whatever insurance they hold is unlikely to be enough to support their future. 52% of people think they have life assurance, 28% think they have critical illness and 36% think they have income protection, either through a policy they own or one arranged by their employer.

Again these statistics only go to reflect the sheer wealth of opportunity on offer in these markets. Indeed there are many ways to utilise the insurance market with many being much simpler than they first may appear. Knowledge combined with a bit of foresight can certainly make this a sector that can benefit both you and your new/existing clients by making sure that their priorities are well taken care of.