Many industry insiders still talk about the UK protection gap and how vast it is.
The numbers speak for themselves with the estimated value of the gap currently sitting at an eye-watering £1.4 trillion, according to SAS: Data and AI Solutions.
And while discussions about the so-called gap are well founded, some others dismiss the figure, so perhaps it is time to change the narrative?
Instead of aggregating the numbers, could we take the conversation further and talk less about gaps and instead focus on what we can all do to improve consumer outcomes? Can the focus look at breaking down the reasons behind why the protection gap exists? Only then will we truly be able to understand how to chip away at resolving it.
NO SPEEDY SOLUTION
There’s no obvious quick fix when it comes to solving the problem. It will take a huge effort, not least because it is up to every consumer (as well as every adviser) to consider their needs and risks, how they can protect them and ultimately decide if they want to do something about it.
But we must start somewhere, and my view is that we need to place more value on the very small number of key connection points consumers have with financial professionals such as mortgage advisers, who are qualified and regulated to provide both mortgage and protection advice – or where mortgage brokers partner with a protection specialist.
Currently, it is estimated that a third of mortgage holders have no Life, CIC or IP cover, even though almost half of people would struggle with mortgage payments within six months of income loss.
While two-thirds of people recall protection being raised during the mortgage process, a third did not even have a conversation. This is a tangible protection gap.
We are told that 40% of advisers report that more protection conversations have occurred since the introduction of the FCA’s Consumer Duty, proving rules can sometimes drive better behaviour when embraced, rather than simply ticked boxes.
MEANINGFUL CONVERSATIONS
The protection conversation is about building financial resilience. It’s about doing whatever we can to help a family understand the consequences of what life may throw at us. Which means it’s not a tick-box end to a fact find – or an uncomfortable sales pitch – but an essential part of any mortgage conversation.
What is uncomfortable is when the client’s health changes (or worse) and they can’t pay their mortgage.
Use simple, plain language. Evidence individual and specific client needs. Make it tangible and real to show ‘why’ cover is needed before getting into ‘what’ cover is needed.
Managing client expectations is a skill, and being aware of our strengths as advisers as well as our weaknesses is not only a great first step, it’s a strength in itself.
For those lacking knowledge and confidence in protection, or in need of more support, or who just want a certain question answered – there are plenty of friendly protection folk on LinkedIn.
UK households remain under-protected, but the mortgage sector is busy, that should be the perfect combination to make a difference.
When advisers move from box-ticking to meaningful, timely conversations, the protection gap shrinks, consumer resilience grows and regulatory expectations are met.
