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