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