In an ideal world, having some life cover, critical illness cover and income protection would be a priority for everyone but people do not automatically buy protection insurance.
Many will be aware of the existence of protection insurance but they still need to be convinced of its worth. Nic Cicutti recently wrote in Money Marketing that advisers should stop focusing on selling, as being “sold to” infantilises consumers.
But Nic makes the mistake of thinking everybody is as clever as him and the population can make expert choices on all financial matters with the appropriate research.
When it comes to life cover, critical-illness cover, and income protection, people would rather spend their money elsewhere and unless they are faced with the facts head-on, are likely to put off buying insurance until it is too late.
Years ago, the Man from the Pru knocked on doors and showed families the error of their ways if they had not taken out a financial product. Some of the products sold then were not as cheap as, say, life insurance is now but, in many cases, the salesman built up a relationship with his clients and was seen as a trusted friend of the family.
This relationship meant many families who might not have gone out of their way to buy financial products had savings and financial protection. My family benefited from this. My dad paid £2 a week for five years, at the end of which we had a payout that was enough to pay for a holiday in a caravan at Croyde Bay – at the time, the best holiday of my life.
My dad also had life cover, not very much, but enough to ensure my mum would not be destitute if he were to die.
When you look at the investment return of such a product, it is not top of the market but, without that insurance man knocking on our door every Thursday, we would have had no savings and no cover.
Advisers now have a different role but it is still the ability to present the what-if factor and open eyes to risks that prompts many people to take out protection.
This, as a process, depends on some selling but mostly advice. Most people will know having a safeguard makes sense but they almost need to have that knowledge reaffirmed before they make the decision to purchase the product.
At the moment, people are faced with a choice. They can buy insurance online or from leaflets on supermarket shelves or face to face with an adviser. The internet may offer a fast service and may be suitable for a certain type of client but it cannot offer someone the individual tailored approach that an adviser can. It certainly cannot ask the questions that an adviser might ask – questions that the customer might not have thought of themselves or don’t even realise need asking.
Unless people know everything an adviser knows, they could end up buying the wrong product. Most people buy cover from the internet or the supermarkets because they think it will be cheaper but price-based decisions could create many areas of potential concern.
It is an adviser’s ability to analyse risk and their understanding of all products on the market that make their advice so valuable and unique. Advisers who have had first-hand experience of a client making a claim and seen the difference a payout can make will be passionate about making sure their clients are protected.
Protection is a vital purchase and should not be treated as a commodity. There can be big differences between the products on offer. How, for example, would a couple know that two single-life covers might, in some circumstances, be more appropriate and not necessarily all that more costly than joint-life cover, if they did not seek advice?
Good advice is imperative if people are to get the cover they really need and it is up to all of us to get this message across. IFAs are in a great position to help people see this. The public are not going to get this sort of advice by buying a product online or at the supermarket.