Oliver Jones, Sales & Distribution Director, National Friendly
Income protection policies are mostly sold, not bought; the consumer's lack of awareness and knowledge of the product means they rarely seek it out and need to be educated on what it could do for them. This means that by the time they realise the product's relevance, it is often too late.
In the current financial climate, it's more important that customers are aware of how income protection could benefit their financial well-being.
Oliver Jones, Sales & Distribution Director at National Friendly, explains that during recessions people are more vulnerable and may be relying on their savings to cover the cost of living.
He says: "If people can't work, savings will deplete even faster. Bills don't go away; they need to be paid. This is where income protection can provide peace of mind should they be off work sick or injured."
Contrary to what is often in the best interests of customers, many view income protection as a product that is acquired when times are good and deemed not necessary during economic uncertainty.
According to research carried out by Royal London, 1 in 10 people are reviewing their protection premiums due to the cost of living crisis.*
Jones says: "People tend to think these financial products are for the wealthy and it is not necessarily the case. It's a policy which can provide vital support in their time of need that they should be considering, even though they're cutting down on their costs elsewhere."
He explains that the products can be more affordable when tailored to the customer's needs. By reviewing their expenses, speaking to an adviser and structuring a plan, customers can ensure they have the protection they need.
Untapped Potential
Yet, while income protection is still predominantly sold rather than bought, it doesn't have to remain that way.
According to Swiss re Term and Health watch 2022**, in 2019 there were a record number of sign-ups for income protection. These fell in light of the pandemic in 2020 but rose again in 2021. Furlough had shown many people the importance of having an income to pay for rent, mortgages, bills and even eat food.
Jones says: "The furlough scheme in my opinion was the largest income protection scheme there ever was. People who genuinely needed it and received the benefit saw its value."
There is also hope in the form of the upcoming new Consumer Duty that will set higher expectations for the standard of advice firms give consumers.
Jones believes that this could have a particularly significant impact in the world of mortgages.
He says: "The biggest financial commitment in your entire life is probably going to be your mortgage. You need to pay for that month-on-month, and should you miss 2 or 3 months through illness that would be a big problem financially. Income protection takes away that worry."
While it may take a while for consumers to be informed on the merits of income protection, with greater exposure through advisers, there is scope for a cultural change.
Jones highlights that using budget planners could help justify the necessity for income protection. Standard income protection tends to start from around £20 a month, which barely constitutes a restaurant meal or a month's worth of takeaway coffees.
He says: "You're not talking huge sums of money in the grand scheme of the protection that you can potentially get. We need to change the narrative to show it's not a luxury but a necessity."
At National Friendly, we believe some cover is better than none. Cover your clients with either our Income Protection plan or our Accident Only Income Protection, that can provide alternative cover to a large, underserved sector of the population.
This post is funded by National Friendly.
* https://www.covermagazine.co.uk/news/4047527/evaluating-protection-premiums-cost-living-royal-london
* Swiss re Term and Health watch 2022
