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Roger Edwards: 3 reasons clients don’t take out protection

When I first started working in protection insurance 20 years ago, there were no mobile phones, internet or even individual computers on desks. We had to work out life assurance quotes from rate books, get them typed up by the typists and then fax them out to advisers. Now of course we have instant access on the web to more information we can handle. We can do quotes instantly and we can communicate by mobile phone, email, twitter, LinkedIn and by video call on Skype or FaceTime.

Despite this information overload, the top three reasons why people don’t buy protection have stayed the same. People don’t think they need it, they think it is too expensive and they don’t trust companies to pay claims.

It won’t happen to me

Isn’t it amazing that despite a one in 14 million chance of winning the lottery jackpot, people still believe it could be them and religiously buy a ticket every week. And yet, if those same people were told they had a one in 14 million chance of getting cancer, they would immediately think it couldn’t possibly happen to them.

But as we know, the odds of being diagnosed with a serious illness are much higher than those statistics. According to figures from Cancer Research UK, more than one in three people in the UK will develop some form of cancer during their lifetime. While the British Heart Foundation reports that around 146,000 people have a heart attack every year and it is estimated that nearly 1.2 million people in the UK have suffered a stroke.

Of course, we all hope no-one in our family dies or becomes fatally ill, but it makes sense to be prepared.Thanksto better diagnosis, improved treatments and the development of nationwide screening programmes for breast, bowel and cervical cancers, more people than ever before are surviving cancer. But many people don’t appreciate the lasting effects of a serious illness and the impact that can have on the family finances.

The pay out from a critical illness or life insurance policy won’t make the emotional aspect of the death of a loved one or a critical illness easier to deal with. It will, however, mean that a family can keep up with their regular outgoings and ensure their lifestyle isn’t compromised.

I can’t afford it

The perception that protection insurance is expensive has always been an issue. Economic conditions mean that consumers now have more reasons to make savings in their everyday expenditure and so it is not surprising that people will not want to add an extra outgoing to their bank statement. But this should not mean that people ignore their long-term financial responsibilities. In particular, how they would cope in the face of a serious illness or death.

In the past protection marketing messages concentrated on providing a large lump sum to clear the mortgage or to replace the breadwinner’s income in its entirety. In the current climate, smaller amounts of cover that are affordable and protect the very basic elements of an individual or family’s lifestyle can still make a difference.

Reducing the sum assured will make the product more affordable and clients can always add more cover when they are in a better position financially. £20,000 worth of critical illness cover will make a difference to people and is certainly preferable to none at all. And with the cost of life cover cheaper than it has ever been, a 30 year old could get around £200,000 worth of cover for just £10 a month.

The insurance company won’t pay out

The published news is often the bad news and unfortunately this has led consumers to believe that insurance companies will do anything not to pay a claim.

This is a total myth. Where a claim has been declined, it is usually due to a claim made for a condition that isn’t covered on the policy or a case of deliberate non-disclosure.

Providers are in the business to pay clams and it’s vital that clients understand the importance of disclosing their full medical history when applying for protection insurance.

It is equally important that clients are made aware of the key features and any restrictions around the policy at the point of sale, with their adviser. Only then can consumers make an informed decision that what they are buying is right for them.

Most providers are now paying out well over 90 per cent of claims for both critical illness and life cover and less and less claims are declined for non-disclosure. During the last half of 2011 Bright Grey paid 91 per cent of critical illness claims and 97 per cent of life claims. Only 2 per cent of critical illness claims were declined for non-disclosure, which amounted to just 3 people.

In an industry like ours claims statistics are important. They provide reassurance that if your clients ever have to make a claim, they will be paid.

Roger Edwards is managing director of Bright Grey & Scottish Provident


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Very samey – anyone who reads a book about life insurance could have written that!

  2. Well nice to know our firm pays out mate, but Joe public still thinks the protection policy industry is poor value as historically so much or it went on commission, PPI is so fresh in the public mind that all protection providers get tarred with the same brush.

  3. Nigel Worthington 4th September 2012 at 5:58 pm

    Commission on protection products needs to go!

    That would make the product significantly cheaper.

    IFA sales of protection products should be paid by fee for the advice given.

    Paid claim rates have risen since providers have been publishing claims paid statistics, so perhaps Joe Public were quite right about point 3 above.

    There needs to be a government Not for Profit brokerage of these policies to the public, then perhaps people will buy protection products.

  4. @roger Edwards I get the problems Roger we all and Im not trying to detract from your message but the issues I have with your article is two fold
    1) £20,000 of cic and review it when they can afford it is madness life is as cheap as it as ever been but cic is only as cheap as your age when you take it out. As you get older it gets more expensive even a year can have a significant impact on premiums. Take it now it will only get more expensive
    2) Surely the solutions you present are already being tried I know I do but still the apathy continues. I would like to see advisers and life companies to come together and discuss solutions to the very common problems.
    @nigel Worthington really you think commission should go to make the price cheaper obviously not an adviser then. We are in this situation because of the price is king outlook.

  5. To the first Anonymous – IYO but that doesn’t make it untrue does it?

    From anonymous No.3

  6. I agree with Roger – eminently sensible. I have a partner who was ‘sold’ CIC with her mortgage – when she was diagnosed with Cancer 2 years ago, she was astonished to find her mortgage was paid off completely – she knew she had some sort of insurance but wasn’t clear on what it was – it made an immense difference to her. The industry needs to concentrate more on the ‘Good News’ aspects, rather than scaring people – perhaps that’s why so many don’t make Wills.

  7. Anybody who believes protection plans are too expensive really needs to think again.

    More to the point, if a worthwhile IP and CI plan was obtainable for £5 p.m.there still wouldn’t be queues outside my door.

    Roger has missed what I consider to be the main reason for not protecting themselves or family…which is apathy.

  8. @ Nigel are you the former Northern Ireland Football manager as that is the only excuse I can think of for the comment about charging fees on protection… So your suggestion is to alienate even more of the Bristish public who wouldnt be able to pay for advice on protection – Investments are a different matter as that is savings… Not going to happen so please keep the RDR hat out of the protection ring.

    @ Alan you are spot on, especially around the cost element. Clients are not aware of all the options available… Great example is a life only FIB – Cheapest form of life cover in the market but how many clients know about it?

    The issue is still clients lack of exposure to protection products (and costs)… I agree in times of financial difficulty it is hard but we all remember the ‘cups of coffee’ situation…. its all about making your clients money work as hard for your clients as your clients have worked for it.

  9. FAO Annon No.3

    My point is anyone selling protection already knows this. Its been written a million times before and if you cant think of a solution why tell us again.

    As for Nigel Worthington – really? A not for profit government brokerage! 1 – there is no such thing as not for profit. They rake it in. The “not for profit” debt plans being an example. They just get a % from the creditors.

    2 – the government created the MAS and FSA – I’m sure they will be brilliant at being a brokerage.

    From Anon 1

  10. Like a lot of articles on this site, it’s mainly preaching to the converted, and identified the common problems… yet again.

    I’m afraid that life / health protection will never receive a mass consumer buy-in, unless it becomes mandatory.

    They’ve done it with car insurance, there’s no reason they can’t do it with life cover at least, which is a lot cheaper, and a lot simpler.

    I for one believe it is possible with the right drive and initiative.

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