Forewarned is forearmed, as the saying goes. But getting consumers to understand the potential consequences of not having protection is an uphill struggle. Research from the protection industry is bursting with evidence of lack of awareness, apathy and misconceptions that act as barriers to buying products. But given we are in the age of digital communication and social media, where it seems virtually impossible to lack awareness of anything, how is this happening? And what can the industry do about it?
Tackling the obstacles to protection is only possible when we understand what people already know – or think they know – about it. Industry commentators agree people are vaguely aware of what protection is and that they need it but get confused when it comes to specifics. People often overestimate the costs, while vastly underestimating the percentage of claims paid out.
Having won three awards at the recent Lifesearch protection awards, LV= is well placed to observe what is happening at both the industry and consumer level. Protection product manager Chris McNab points out there have been some good initiatives to raise consumer awareness, such as the Seven Families campaign. However, he feels the industry has been preaching the same message to the same people through the trade press, as it is more challenging to get positive protection coverage from the national media where it would reach consumers directly. Saying that, he believes greater consumer awareness on its own would not necessarily change anything.
“People are aware of pretty much everything because of digital media but how much of this drives us to do anything different? Awareness that drives action is the crux of it,” he says.
According to another Lifesearch award triple winner AIG Life there are three factors at play in consumers not understanding protection: apathy, financial products that seem too complex and not knowing where to get financial advice.
AIG Life head of marketing and propositions Steve Casey says: “Historically you would go to your bank but now they have pulled back from the mass market that option is not there anymore.”
There are potentially three ways to counteract the protection problem: financial education starting earlier than at the point of life events such as needing a mortgage, simplifying products and application processes, and getting more people to take advice.
Casey favours financial education in schools during the teenage years but points out the industry needs to interact with the younger generation using social media and being spontaneous, rather than waiting days for a sign-off from compliance.
British Friendly marketing and distribution director Iain Clark thinks one area insurers can help advisers and their clients to simplify things is in the application and claims process. However, he warns it is important to ensure the product itself remains comprehensive and effective.
Drewberry Insurance director Tom Conner does not buy the argument for product simplification either. He says: “If you introduce simplified products it makes it more confusing for consumers. You will have multiple levels of underwriting that is more confusing and people would have even more choice.
“Once people are in the hands of an adviser it is easy – they do the factfind and the adviser deals with the process.”
Roxburgh Financial Management head of protection Andrew Ward agrees the key is for the industry to concentrate on connecting people with the right adviser.
He says: “Advice is the best way as people can trust they’ve got the right product that is going to do what they want it to do and they can be guided through the process. You can’t make the products and process too simple or too quick as there has to be the right checks and safeguards in place.”