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PruProtect: Some compulsory protection required

The debate around making protection compulsory has sparked a number of provocative comments, along with reasons why it cannot work.  This is almost a natural reaction and there are reasons for this, although defeatist by nature.  It is made out to be an unspeakable option and reserved only for the world of academia and theory.  There is, however, a deeper point that relates to the concept of compulsion and that is that I believe strongly that everybody should have access to protection.  
 
The need is very clear, especially so, in a developed society such as our own.  Families, individuals and businesses strive to progress and grow but often fail to protect what is most important to them.  The emotional and financial impact that an illness or bereavement can have on a family can be one of the biggest life changing events, and to run the risks associated with the ensuing consequences can only be classed as gambling.  

An element of compulsion could be a very effective catalyst in getting consumers to understand the benefits of protection insurance.  A simple and intuitive example is for someone with dependants taking out a mortgage; for this group, a protection policy would be an invaluable protection.  

Further, the progress in medical science takes us into an environment where protection cover against death only is insufficient – cover against serious illness is becoming more and more important.  It is not uncommon to hear of people we know that suffer from heart disease and cancers and continue to have good life expectancy.  
 
I would argue that the everyone has a need for serious illness cover – quite a bold statement and may be a little extreme but one that aims to get across its importance.  It is unfortunate that the value of protection has been eroded over time, due in part to the incessant focus on price.  The ‘buy it as cheap as possible’ attitude detracts from meeting the real needs of consumers.  It is critical that consumers understand the risks they face and are in a position to make a conscious decision as to whether they wish to gamble or take action.  In order to understand and genuinely meet consumers’ needs the role of advice cannot be overlooked.  I believe advisers are best placed to help consumers with this fundamental aspect of their life planning.  

Absolute compulsion may not be an easily achievable reality but our aim must be to provide protection to our society.  This would provide much greater stability for our society and our economy – outcomes that are much sought after by all.  The coalition government has set out their Big Society agenda, this could be a further strand to this – ‘empowering people to protect what is important to them’.

PruProtect product and actuarial director Deepak Jobanputra

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. As with NEST pensions, compulsion would see commissions vanish. This idea would be another blow to IFA’s and mortgage brokers but large insurance companies could benefit by using their cheap call centres and email marketing to clean up. Cheers Deepak. Nice to know where you see your future!

  2. We would all like to have a Ferrari and a big fat pension pot, but sometimes for the general public it is what you can afford.

    Half the public don’t have pensions so do you really think that they are worried about dying or falling seriously ill.

    Where do you put the priority, starting a pension, protecting your income, having a capital sum if you have a major illness or protecting your family in the event of your death. The cake is only so big to go round.

    More and more people don’t have protection because it is not sold anymore due to the death of the saleman.

  3. If anything protection compulsion should rank above the need for pensions compulsion.

    How else can you provide for your own retirement if you are unfortunate to succumb to a critical illness or condition that prevents you from working

    However no chance that this would ever happen.

    After all, the Gov’t likes to look after IFA’s – don’t they?

  4. Perhaps Deepak Jobanputra can get his pals in the coalition to make it compulsory for everyone in the UK to be able to afford protection.

  5. I admire Deepak’s zeal for CI/Serious illness cover and I would like to think that my own entuisiasm is equal however I cannot countenance the idea of compulsion.

    It is neither workable nor appropriate. Whilst it would theoretically provide consumers with some limited cover it would also remove their ratioanle for seeking more appropriate cover. In other words it would reduce the cover that some take and would provide cover for those that would never take it.

    To my mind this is not an appropriate trade off and this is supported by my aversion to being nannied. Where would such matters end?

    Also, which insurer would provide this? Out to tender, maybe? Look at Mess….I mean Nest!

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