New research reveals massive gaps widening on life cover and income protection insurance.
The ninth Swiss Re Insurance Report, A Gap in Perception, says consumers' belief in the amount of protection cover they have is overly optimistic.
The report says that 42 per cent of people believe they have income protection but this does not correspond with industry data on protection sales.
The report says the income protection gap has widened from £130bn in 2002 to at least £150bn. It says: “The biggest cause of the protection gap is people believing they have enough insurance.”
The life insurance gap has risen from £2trillion in 2002 to £2.2trillion.
Swiss Re found that consumers are unsure over what their critical-illness insurance covers, with several expecting “critical” to mean anything that stops them from working.
The report challenges the industry on whether income protection cover or a combination including IP would be more appropriate for the majority of consumers.
It says consumers need to be financially educated. The FSA has a responsibility to improve consumer education but it suggests the education process should start at school, learning about financial risks and the consequences.
Swiss Re life and health technical manager life and report author Ron Wheatcroft says: “There is still a long way to go for the industry. Consumers have a little more faith which is encouraging. The gaps in cover are a massive opportunity for firms to bring innovations to customers and savings to the protection industry.”