Financial advisers Future Proof discusses the results of its 2016 research into the protection market.
We at Future Proof recently surveyed our client base to understand the main factor in a customer's decision-making process when buying Life Insurance.
In addition, we wanted to understand the reasons why some customers choose not to buy Critical Illness Cover and/or Income Protection.
We asked policyholders a series of simple questions, 645 customers completed the survey and we have analysed the results, here are the highlights.
Main factor when deciding which cover to buy
Some 61.2% of respondents said the main factor in deciding which cover to buy was the quality of cover (including free add-on benefits) compared to price. Surprisingly, men and women have a similar view on this.
There was a direct correlation between the age of a customer and the main factor when choosing cover - as people get older they place more importance on the quality of cover.
This may be because they have more experience and understand that cheaper cover may have limitations and perceiving that free benefits such as Best Doctor's & Helping Hand offer real value.
The younger generation are more likely to choose their cover based on price, hardly surprising given millennials are also referred as the ‘shop-around' generation.
Main reason for buying Life Insurance?
Additionally, 64.2% of respondents said that the main reason for buying Life Insurance is to provide financial security for loved ones.
This challenges current thinking that the main reason people buy life insurance is linked to their mortgage requirements.
In addition, 17.3% said that they bought Life Insurance cover to leave funds for funeral expenses which broadly matches the percentage of our customers who have Whole of Life Cover.
As expected as people retire they turn their attentions to other product types such as WOL cover with 38% of our retired respondents stating the main reason for purchasing Life Insurance is to leave funds for funeral expenses.
Main reason for not buying Critical Illness?
Some 40.9% of respondents said that main reason for not buying Critical Illness cover is that it costs too much.
And over a quarter (27.3%) of respondents said that their main reason is it's not required which we would refer to the ‘it won't happen to me' mentality.
We plan to follow-up on both of these points via customer communications to ensure our customers have a realistic perception of the price of CI cover and share CI statistics highlighting reasons for claims and average age of claimants.
We were surprised to see that 46.9% of respondents state that they have Critical Illness cover, however, this is well above the number of our customers who hold CI cover.
We invest time in improving our customers understanding of Protection via quarterly emails and expert advice, however there is still obvious confusion between different product types and industry jargon.
As an Industry we need to work together to simplify cover types and policy wordings.
Main reason for not buying Income Protection?
Overall, only 19.9% of respondents had Income Protection and women are 30% more likely to buy Income Protection compared to men.
We analysed the data to look at respondents of working age with dependent children, 65% said that their savings would cover their outgoings for a maximum 3 months but only 24.5% have income protection.
Trust Forms
We surveyed our policyholders to understand the main reason for not completing a trust, on a positive note 31.8% said that there policy is in trust, however, 39.9% said that the main reason is because they've never got round to completing the trust form.
We offer a free ‘Check and Send' Trust service and provide our customers with help completing their forms but are looking for opportunities to increase the number of policies registered in trust.
In the future, we will be using a non-branded standardised trust form for all insurance policies with the aim to make the process simple and straightforward for all customers.
What next?
Our efforts will be focused on improving each customer's knowledge of Protection. What's important is that people understand the basics - do they understand the difference between Terminal Illness and Critical Illness?
Could a customer tell you the main benefits of registering a trust for their policy? Do they have a realistic view of the price of Critical Illness cover?
We also need to find new and interesting ways of sharing Claims Statistics with our customers to erode the ‘It won't happen to me' mentality.
Feel free to use the results of this survey with your customers and join us in breaking down misconceptions that still exist.
