It is getting tougher to convince people to buy protection. This is not because we are not promoting it or because advisers are not building it into their recommendations.
Even dismissing the usual “it will never happen to me, so I don’t need it” attitude with well reasoned arguments, is not enough these days to overcome the main problem.
The problem is many people do not have enough cash to spend on the essentials of dayto-day living, let alone life insurance. It is not up there on their list of priorities such as utility bills and the weekly shopping.
Ironically though, the reality of leaving a family unprotected is staring all these people in the face and yet to a certain extent they can’t see the wood for the trees.
Times are hard because of economic factors beyond the direct control of the public. Inflation is creeping higher and increasing the cost of living while wages are either frozen or capped.
Interest rates, which are at an all-time low created a shortterm buffer zone, an illusion of liquidity, as people had more to spend as their mortgage payments reduced but this effect is long since over and lower interest rates mean people with savings are not growing their investments faster than inflation is eroding them.
Many people are struggling but apart from those who have lost their jobs, these strugglers are still earning. It is hard and they may have been exposed to the fact that their income is insufficient to cover their outgoings.
But fortunately they have not had to face a total loss of income. They have been given a taste of how bad things can be but they still have time to plan for the worst.
So how can we get these people to buy protection when things are so tight?
One of the most well received ideas we developed at Bright Grey was the Cafe Latte Calculator. This was conceived in more prosperous times and invited customers to enter the number of coffees they bought each month on the way to work, along with the number or takeaway meals and trips to the cinema or spur of the moment luxury purchases.
Most were surprised to find that the sum amounted to anything up to £400 a month. The protection argument is then rather simple. Reduce this outgoing by one or two coffees a week and use the saving, say, £40 out of the £400 to fund a protection product. That £40 investment could provide the money in future to enable them to continue to spend the other £360 if they are unable to work due to illness.
In our post-recessionary world, many people have already made such savings by cutting back on premiumbrand coffee and perhaps taking a flask of coffee with them to work. But the argument still stands. Finding an extra £20 a month from spending is not that difficult and it could ultimately protect the ability to continue to spend the remainder.
In the past, most protection marketing messages have focused on providing a large lump sum to clear a mortgage or to replace a breadwinner’s income in its entirety or on other windfall amounts of cover.
In the current economic circumstances, smaller amounts of cover that are affordable and protect the very basic elements of our lifestyles can still make a difference to people who are already feeling the pain.
A total of £20,000 worth of critical-illness cover or £10 a month worth of life cover is preferable to none at all.
Roger Edwards is proposition director at Bright Grey & Scottish Provident