The only way the industry can hope to tackle the protection gap is through direct channels, according to Defaqto.
It says a third of level term insurance products are marketed through IFAs but almost half are marketed through the direct channel.
Insight analyst for life and protection Ben Heffer, who wrote the report, says: “This trend will continue as the IFA sector shrinks and becomes less concerned with protection than it is now and the need for providers to increase distribution becomes an imperative.
“It is only though a buoyant direct channel that the industry has any hope of addressing the protection gap.”
Heffer believes that insurers will develop more direct-toconsumer propositions, particularly online, as they look for cost-effective mass distribution in the wake of a shrinking IFA market. He says banks will also play a key role in distributing protection products.
He says: “Now we don’t have the direct salesforces we used to, the organisations that have the most contact with the most people are the banks. I would imagine they are really the only way of reaching more people in terms of closing the protection gap.”
But Heffer argues that although many insurers will be focusing on direct sales, a reduction in provider and adviser numbers means there is still a risk that fewer consumers will have cover.
He says: “There is limited time to put in place effective models to increase the distribution of protection products.”