Every economic crisis brings a unique set of challenges and opportunities. The current cost-of-living crisis is no exception.
This has raised the issue of protection once more as households grapple with the value of taking out or retaining insurance policies. Factors that shape their decision include a house purchase, a new job, having a child or the impact of the Covid pandemic.
Younger consumers seem more open to protection and trusting of claims statistics
We have written extensively on these pages about the need for protection, why it matters and how the mortgage industry can do more to raise the protection conversation with consumers.
Protection gap
The industry has taken steps, but it still has a lot of ground to cover. This is highlighted in the Association of Mortgage Intermediaries’ (Ami) recent Viewpoint report for 2023, which finds that the protection gap persists despite numerous attempts to close it.
Ami’s report, entitled ‘The Perception Gap’, explores the numerous challenges facing the mortgage industry in this area, including the value of advice, building trust, consumer buying habits, and generational views and attitudes. Ami surveyed 3,000 UK adults and more than 400 mortgage advisers on their views on issues relating to the protection market, alongside qualitative research involving a bespoke community of consumers.
The research, produced in partnership with Legal & General and Royal London, finds that one in five consumers struggles to identify any benefits in using an adviser for protection. When asked about the benefits of using an adviser to purchase protection insurance, nearly a quarter of consumers answered, ‘Don’t know.’
Meanwhile, the top reasons for using an adviser were knowledge, ability to speak to a human and their regulatory status.
If protection is treated like an afterthought, it should come as no surprise if those conversations do not live long in a client’s memory
However, the research also shows there has been a rise in the number of consumers who recall an adviser-led protection conversation — to 50%, versus 36% in 2020 when the report was first published. And one in four consumers who didn’t have a protection conversation with their mortgage adviser said they would have been interested. This is encouraging and shows that consumers do care about protecting themselves and their families.
Just Mortgages head of mortgages and protection Ben Allkins believes the industry must commit more time and resources to closing the protection gap.
“There’s no question that protection can sometimes be the poor relation to mortgage advice, especially in a busy brokerage,” he says.
“When brokers are at their busiest, the challenge becomes dedicating the necessary time to have those meaningful conversations around protection and the vital role it plays should the worst happen.
We all need to commit to making a difference if we are to fill the perception gap
“If it is treated like an afterthought, or a broker is apologetic for bringing up the subject, it should come as no surprise to see those conversations do not live long in a client’s memory.
“One benefit of a quieter market is that brokers have the bandwidth available to have those quality conversations.”
Generational shift
The Ami Viewpoint report also highlights the generational opinions on, and attitudes towards, protection.
Older generations, mainly Gen X (aged 42 to 58) and Babyboomers (aged 59 to 81), tend to be distrustful of advisers and claims statistics, while Gen Z (aged 17 to 26) and Millennials (aged 27 to 41) are less so.
We’d encourage advisers to ensure they’re aware of the support offered by providers
More young people — 78% of Gen Z and 76% of Millennials — think it is important to have protection than do the older generations (66% of Gen X and 58% of Boomers). Meanwhile, 67% of Millennials think it is important to have income protection compared to 52% of Gen X and 41% of Boomers.
When buying protection insurance, young consumers are more likely than older generations to regard financial advisers as independent/impartial. And younger people see the benefits of using an adviser to buy protection insurance as ‘saving them money’ and ‘saving them time’. Some 66% of Gen Z and 65% of Millennials say they trust insurers’ claims statistics, compared to just 44% of Gen X and 37% of Boomers.
However, the industry needs to evolve its approach because nearly one in three consumers says that neither percentage- nor monetary-based claims figures give them reassurance that a protection claim would be paid.
The response from younger consumers surprised Ami, which believes this positive result signals a step in the right direction.
What next with claims statistics? How can the sector bring the stats to life? Consumers think it’s too good to be true
“It’s really encouraging and different from what we thought it was going to say,” Ami senior policy adviser Stacy Penn tells Mortgage Strategy.
“What was fascinating was how the younger consumers seemed to be more open to not only protection but trusting adviser motivation and claims statistics.”
Penn adds that this perception shift among younger consumers who grew up in the digital world presents a great opportunity for the industry. She puts it down to the positive personal stories brokers and advisers have been sharing on social media. Many of those stories have resonated with these young digital natives.
Allkins agrees. He says brokers have been engaging younger clients, particularly first-time buyers, on social media platforms.
“Brokers are finding success by providing information and engaging with younger clients on social media and in the ways that best suit them. This gives younger buyers the platform to build knowledge and make informed decisions.
Increasing protection coverage is a clear challenge for the sector, but also one of its biggest opportunities
“With the support of a broker and independent advice, these informed decisions can then be carried through their entire adult life, hopefully increasing coverage in the process.”
Online presence
However, despite the marginal gains on social media, the industry’s overall online presence is below par. The lack of online protection presence for advisers was the most shocking part of the report.
Ami finds that one in three adviser firms has no online presence relating to protection and only a fifth have guides or articles on protection-related topics. Only one in four firms posts about protection on social media and 5% have an online quote form.
Just over one in 10 advisers personally creates protection-related content on social media. Facebook, Instagram and LinkedIn are the most popular platforms used by those advisers.
Brokers are finding success by providing information and engaging with younger clients on social media
Their choice of social media platforms could mean advisers are failing to reach the protection customers of the future. Just 11% use TikTok or YouTube and only 18% post on X (formerly known as Twitter), but 90% of Gen Z use TikTok and YouTube.
It was also shocking to discover from the research that there are some mortgage intermediary firms without a website. This is puzzling given that the internet has become an integral part of daily life. And for most businesses it is akin to a shop window.
“We spend a lot of time online. By not having a website these firms are putting themselves at a disadvantage,” Penn says.
Lingering trust issues
Trust remains the Achilles heel of the industry. Many insiders believe that mistrust of protection stems from long-held beliefs about insurance people being sales driven and profit focused at the expense of policyholders.
Issues such as the payment protection insurance scandal and other negative news in the national media get consumed by the public.
When brokers are at their busiest, the challenge becomes dedicating the necessary time to have those meaningful conversations around protection
Ami admits that the ‘trust dial’ hasn’t shifted since the start of its protection study in 2020.
“We still get mistrust of adviser motivation and claims statistics,” says Penn. “More work needs to be done in the industry.
“What next with claims statistics? How can the sector bring the stats to life? Consumers think it’s too good to be true.”
The report finds that nearly a third of consumers would prefer to buy protection via a price comparison website (PCW), and around one in four regards PCWs as offering more choice and access than those provided by advisers. One third of consumers view PCWs as independent or impartial — slightly more than those who view advisers the same way (27%). Only 16% of consumers view advisers as unbiased towards one type of product or insurer.
We call on advice firms to assess whether it’s clear to consumers the role they play in the protection advice process, and the value of good advice
Almost one in two consumers thinks advisers’ main motivation, if advising them to take protection, is earning commission. But the younger generations are less likely to hold this view.
However, around a third of consumers who use a mortgage broker or adviser say they would trust them to advise on protection more than they would trust a protection-only adviser, specifically because of their knowledge. Meanwhile, one in five would trust them more because of their existing relationship.
Consumer Duty
At the end of July, the Financial Conduct Authority’s Consumer Duty came into effect. The new rules aim to set higher standards of consumer protection across all retail financial services.
The Ami report highlights the positive impact the Consumer Duty is having in the protection space. About 40% of advisers say their firm has had an increase in protection conversations since its introduction, and around a quarter (24%) have seen a shift in the range of protection products being discussed. Meanwhile, 31% of advisers have increased their training and 26% have increased their due diligence.
Our recommendations include actions for advisers, providers and Ami itself
“This is positive, but also highlights the requirements new regulation brings,” says Royal London customer lifestage director of protection Carrie Johnson.
She adds: “Delivering good outcomes for clients alongside the right providers has never been more important. Providers helping advisers to do business easily — freeing up their time to add value for their clients — is crucial if we’re to realise the Consumer Duty’s full benefit. We’d encourage advisers to ensure they’re aware of the support offered by providers.”
Call to action
Ami says it wants to see advisers do more to engage customers in protection conversations. Just Mortgages’ Allkins agrees.
“Increasing protection coverage is a clear challenge for the sector, but also one of its biggest opportunities. It all comes down to education and increasing knowledge, whether that’s highlighting the importance of protection to clients or providing brokers with the tools, training and resources to frame value early, overcome objections and provide quality advice,” he says.
The Ami report called for a rethink from all involved — advisers, firms, networks and insurance providers — to ensure that products offered to customers are “easy to understand, transparent and offer real protection”.
It outlines a five-point action plan on key areas for the industry to focus on, to shift perceptions. These include helping consumers understand the value of good advice, challenging the narrative that the first port of call for many consumers is a comparison site, and reviewing firms’ online presence, including social media.
There’s no question that protection can sometimes be the poor relation to mortgage advice, especially in a busy brokerage
Providers have been urged to support advisers more by ensuring that their adviser tools are accessible and well signposted.
“We call on advice firms to assess whether it’s clear to consumers the role they play in the protection advice process, and the value of good advice,” says Ami chief executive Robert Sinclair.
“Our recommendations also include actions for advisers, providers and Ami itself, as we all need to commit to making a difference if we are to fill the perception gap.”
This article featured in the December 2023/January 2024 edition of MS.
If you would like to subscribe to the monthly print or digital magazine, please click here.
