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The real protection gap is between knowing and doing

Martin Werth welcomes growing support for his push for consumer protection awareness and now is hoping for action

For the last few months, Money Marketing has been promoting my Protection Awareness campaign. I have spoken to many insurers and distributors and have been delighted with the positive response and helpful suggestions. A director of one major protection insurer summed it up by saying until now we considered a good customer to be one who paid their direct debits and didn’t claim but now we cannot consider them a customer unless we engage with them.

To narrow the protection gap, we must first tell people what cover they already have. We sell long-term (not annually renewable) products and, in time, people forget they have protection and what it is for. Invariably, they overestimate the cover and its scope. We need to provide regular clear information on the scope, including what is not covered, and how to take action to address any shortfall or concerns.

There are two components to this, the first is an annual benefit statement and the second is an annual awareness and action campaign.

The impact would be enhanced if we coordinated them but if both were achieved separately that would still be a hugely positive step.

The 2011 Swiss Re Insurance report showed that between 2009 and 2011, the number of people recognising the consequences of serious illness, or death has almost doubled to 52 per cent, yet basic life cover is held by just 36 per cent of adults.

Many protection insurers are sending annual benefit statements, which is great news, but not all do this. I was reminded by an Institute of Actuaries consumer information working party discussion paper, “transforming consumer information” that in 2006, the Association of British Insurers published a review of yearly statements (Making information work for customers), which concluded: “To be useful, these statements should provide customers with necessary information on the performance of their products and prompt action where necessary. But we are a long way from the ideal… In short, we all appear to overlook the customer.”

Five plus years later, this remains an issue for pensions and savings, and now for protection.

My first key message is that the ABI’s code of best practice should make annual benefit statements mandatory for all long-term products, including protection. For protection, this code should prescribe minimum standards, what is covered and what is not covered, and common terminology. Ideally, there should also be a consistent look and feel. I like the use of product labelling which makes clear at a glance the scope of cover.

I recognise it is more difficult to apply annual benefit statements retrospectively and propose that from 2013 these should be mandatory for all new protection plans. This ties in nicely with the need for IFAs to develop closer customer relationships. It would be even better to extend annual benefit statements to all existing customers, as the biggest value is gained by long standing loyal customers who have had more time to forget the cover they bought.

The second component is the protection awareness campaign. I and others are well aware that in 2009, Tom Baigrie failed to rally providers with a consumer protection insurance engagement campaign. Insurers and reinsurers could not agree if and how to provide funds. We should not repeat this experience.

I am hoping this time we have the ABI’s support. In Money Marketing’s March 16 issue, Richard Verdin, chairman of the ABI’s protection strategy committee said “A protection awareness day is something we are considering as part of a package of measures to increase take-up.” On March 21, at the Future of Protection Conference, Nick Kirwan, assistant director of the ABI, responded to a challenge from Tom Baigrie, saying this will be discussed at the next strategy meeting, which I believe is scheduled to happen around now. I very much welcome the ABI’s response.

I would choose September/ October for a campaign, to align with kids returning to school and to avoid Christmas, Easter, the Isa season and summer holidays.

My second key message is the ABI should provide thought leadership on the protection awareness campaign and share this with other equally committed parties.

As a footnote, insurers which have yet to start sending out annual benefit statements should consider doing this around a protection awareness campaign. In this way, the whole is greater than the sum of the parts.

In conclusion, let me quote Bruce Lee: “Knowing is not enough, you must apply, willing is not enough, you must do.” In protection there is a huge gap between knowing and doing, perhaps this is the real protection gap. I will step aside for the moment but will continue to be a conscience for better consumer engagement.

Martin Werth is managing director of Living Benefits

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