Most independent financial advisers (IFAs) believe that younger individuals are not thinking about protecting their finances until later in their lives when it’s often too late. That is one of the key findings of a new report from one of the UK’s largest insurers.
According to research from Royal London, three quarters (74%) of IFAs think that younger consumers should secure financial protection earlier in their lives. Moreover, nearly nine in 10 (87%) IFAs agree that income protection (IP) is “massively undersold”.
The report highlights that while there is a huge opportunity to grow the protection market, one of the biggest barriers is that products like IP are perceived to be too expensive. However, the reality is that a monthly gym membership actually costs more (sometimes twice the price) than an IP policy.
For the research, 205 IFAs were quizzed about their thoughts on the protection market. Two in five (43%) said they are struggling to attract protection clients under the age of 35, while 52% said there is a lack of awareness around IP among their clients and 51% said cost was an obstacle.
Vast Majority Of IFAs Believe The Protection Gap Is Widening
Despite the fact many consumers think that protection is too expensive, Royal London offered a comparison designed to highlight the relative cost.
The insurer said that monthly gym membership fees in the UK are around £40.54, on average. In comparison, a 30-year-old, non-smoking male can secure £18,000 worth of IP for a full term for less than £20 a month. This includes a 13-week deferred period.
The research also found that 72% of IFAs believe the protection gap is widening, while 63% feel that protection products need to be tailored to fit the ever-changing lifestyles of consumers. Interestingly, just three in 10 (29%) believe the gig economy presents an opportunity in the IP market. That’s because while some IFAs see it as a golden opportunity to engage with individuals who are typically underinsured, others (28%) see it as a potential threat because of the irregularity of work for gig workers.
Speaking about the findings of the research, Jennifer Gilchrist, protection specialist at Royal London, said: “It’s clear from the research that we need to raise awareness of the benefits of income protection, especially amongst younger consumers. As part of this, we need to tackle the perception of protection being expensive.”
Gilchrist went on to highlight that there is a whole range of options that can be tailored to individual budgets and customers.
There is a whole range of options that can be personalised to individual budgets. She said that customers are usually pleasantly surprised when they find out that protection isn’t as costly as they first thought.
“Customers are at the heart of what we do, so any insight into their needs is valuable in helping us to provide better outcomes for them which will help to bridge the protection gap,” she added.
Royal London said that providers should consider a number of factors when developing new products, namely, the life expectancy of those with chronic illnesses, changing family dynamics and the rise of the gig economy.
It’s never too early to start considering how you can protect your finances in the event that you are unable to work due to an accident or illness. As the Royal London research has highlighted, securing income protection can often cost considerably less than the price of a gym membership.
I joined Premier Choice Group as a Healthcare & Protection Consultant in 2017, where I now look after the needs of over 200 clients nationwide. Prior to joining the Premier Choice Group, I worked for a large Private Healthcare Insurer, VitalityHealth, and managed SME and Individual clients across the country.