Given the lack of summer last year and the incredibly wet winter we have endured so far, the phrase “saving for a rainy day” seems a bit incongruous. Perhaps we should change it to “saving for a sunny day” on the basis that these are far rarer occasions.
Either way, something that does not seem to change is the fact that most UK families have far too little put aside to cope with unforeseen circumstances. ING Direct reported in 2012 that the average family in this country has just £2,040 stashed away in terms of savings – incredibly this figure was up on the previous year.
It is somewhat shocking therefore to note that a recent survey conducted by protection industry group The Syndicate found that 70 per cent of the 3,000 UK adults questioned said they saw their savings as a way to provide financial security.
The same research threw up several other interesting results, among which was the average amounts customers would be willing to pay for various insurance products. When it came to income protection, for example, the majority of people were happy to pay up to £20 a month.
Figures produced by the Association of British Insurers in 2011 place the average IP premium across the industry at £24.42, so in this area we are already closely aligned with our potential clients in terms of their expectations and the reality of our products.
Just as pleasing was the level of comprehension the respondents showed in respect of IP: 45 per cent of those asked correctly identified the definition of IP from a list of six alternatives, meaning it fared considerably better than ostensibly simpler products such as term assurance – only 20 per cent picked the correct definition here, with over 30 per cent believing it pays out an amount at the end of the term if you do not die during the life of the policy.
So, we have a product which conforms closely to the expectations of customers, both in terms of cost and functionality. The disconnect seems to be the belief that savings can be relied on to meet the need for which IP caters and, just as worryingly, that the state will provide in times of emergency.
Around 50 per cent of respondents in The Syndicate’s research felt that, despite recent cuts, they could rely on the welfare state to provide a safety net in the event of a long term sickness or disability.
Just as delusional, 56 per cent believed their employers provided what they termed a “generous sickness allowance”, despite 66 per cent admitting they did not know what was actually offered.
This type of research is crucial in helping providers and distributors of protection products understand how to disturb the need for cover with the public. It can also crystallize thinking in terms of what we, as a united industry, might do to dispel some of the myths which cloud thinking when it comes to provisioning for family protection.
A proposal which is worth getting behind is the push for an annual report for every employee in the UK, similar to the P60, which shows not just income but also sick pay provision and state benefit levels. This would act as a spur to action for the public and a fantastic tool for advisers in assessing and demonstrating shortfalls in their clients’ provisioning.
Phil Jeynes is head of account development at PruProtect