While there are peaks and troughs depending on where we look, the UK life insurance market is typically quite flat, including mortgage-related protection.
Recent data from Which? highlighted that more than half of people in the UK didn’t have any life cover in place, leaving them and their families potentially at risk of financial hardship should anything happen.
More positively, recent changes to the Inheritance Tax (IHT) regime have prompted more people to reassess their financial planning, with whole of life sales up significantly year on year.
Either way, there may be barriers to overcome to get more UK adults to take out life insurance, with consumer confusion around the underwriting process potentially deterring women, millennials and Gen X from purchasing life cover.
We recently conducted a study among consumers which found a lack of clarity around how the buying process works could seemingly be putting people off.
PRICING UNCERTAINTY
The findings showed cost worries emerged as a big concern that was potentially blocking the purchasing journey. Over half of female respondents (55%) stated they would be frustrated if the price they are initially quoted for life insurance increased after they answered personal questions covering occupation and health through to travel and lifestyle, this compares to 47% of male respondents.
Further analysis shows that women are also more likely than men to cite cost as a barrier to purchasing life insurance (34% compared with 30%).
However, pricing uncertainty emerged as a clear frustration across all adults, with just over half of respondents who we surveyed (51%) saying they would feel frustrated if an initial quote increased after providing extra personal information. Within this group, almost a quarter (24%) said that change would be very frustrating.
The research also found a high level of confusion amongst UK adults around how life insurance pricing operates. Two thirds of consumers (66%) recognise that personal factors such as medical history, occupation, hobbies and family health can influence life insurance pricing, yet many remain unclear. Almost a quarter (24%) said they were unsure how these factors affect the price they are offered, whereas 10% said they didn’t believe they did.
Uncertainty about what will influence the final price of life cover is therefore a big stumbling block, and one that can put people off taking out life cover.
It seems that there are several consumer concerns that need to be overcome, beyond just price. Overall more than three in five UK adults (61%) said there was at least one barrier when considering purchasing life insurance.
Whilst three in 10 (32%) of adults worried it will be too expensive, more than one in five (21%) said they were unsure whether insurers would pay out, while another 14% described the purchasing process as complicated or overwhelming.
A further 14% said they would not know where to begin or who to trust when looking into cover and for some, while for one in 10 (11%) the issue is simply timing, and something they would tackle later.
Conclusion
There is a clear consumer confidence gap around underwriting, pricing and how the life insurance buying process works. There is also a wider education piece that needs to happen, that can reinforce how policies work, the benefits, how often insurers pay out and therefore the long-term value of the product.
Our research findings are interestingly mirrored by the recent findings in the PDG’s recent Protection Insights Report that showed that lack of adviser confidence in underwriting was a key issue, with nearly 6 in 10 (59%) advisers who were surveyed saying inefficient underwriting was a key barrier to writing more protection policies.
Technology enables real-time underwriting so this is a solution that can help deliver results quickly and help advisers with getting applications over the line without delays. We need to work with advisers and insurers to help communicate this to consumers and to tackle some of these confusions and myths around payouts and processes – which ultimately will help cover more consumers and protect more lives.
