More work required was one assessment in a discussion with sector experts, but the outlook is positive after Covid reminded us all to prepare for the unexpected
In broaching the subject of protection in 2023, Mortgage Strategy asked a selection of people involved in the sector to summarise it in three words. What stood out was the majority of replies incorporating an expression of potential or possibility.
“More work required,” were the three words given by London Money mortgage and protection adviser Jiten Varsani – probably the starkest assessment supplied, and one providing the ideal starting point for more investigation.
First, the question of whether the Covid pandemic had had any effect on the perception of protection.
“Childcare is now handled very differently in many households, and periods of school closures and lockdowns have shown the importance and financial value of childcare,’ says Hargreaves Lansdown specialist financial adviser Rosie Richard.
“People have become much more open and engaged to talk about the what ifs’ in life, and how they might plan for them.”
She adds: “Women are massively under-protected especially after having children, across life cover and income protection.’
Mortgage Advice Bureau protection proposition director Andy Walton says: “Furlough might have raised awareness of the importance of income protection as, without that government support, many would’ve been left to fend for themselves and would’ve struggled to pay their mortgage or rent.
He continues: “Income protection is now seen by many advisers and customers as their own private furlough scheme which can’t be taken away.’
And PRIMIS chief operating officer Toni Smith raises the fact that,”[Covid] brought about more questions of people’s general health, with mental health in the spotlight greatly supported by protection products` wider benefits.”
The subject of mental health proves an ideal opener for the question of which protection gap most worries our experts. Austin Friars Financial co-founder Andre Botes has much to say.
“Mental health problems affect both men and women, but not in equal measure. The Mental Health Foundation states one in four people will experience a mental health problem of some kind in the UK each year. One in six people reports experiencing a common mental health problem, like anxiety and depression, in any given week in the UK,” says Botes.
He continues: “Women are more likely to have suicidal thoughts and make attempts, but men are three times more likely to take their own life. Women are three times more likely to experience common mental health problems.
‘’If we look closer at the numbers, though, we have to take into account that women are also far more likely than men to get treatment and report mental health problems.
“Moreover, domestic violence and abuse have a very strong correlation with mental health. We need to make a closer association between mental health and domestic violence.
“In summary,” says Botes, “it seems protection plans for women might be detrimentally affected as a result of statistics.
Perhaps we should look deeper into the reasons why the statistics show the numbers they do as there is great disparity between the genders. Mental health underwriting is an area where the industry can make improvements.”
According to TMA Club development director Lisa Martin: “Any protection gap is a worry. Aside from the financial aspect, the emotional toll of losing an income is very real, and it can cause stress and damage relationships.’
She highlights income protection, however, saying it is the least-sold policy type.
“Research from LV= has shown that people do not have adequate funds to rely on if they are unable to work.
“For instance, while 43% 43% of people say they could rely on savings, 39% of people have less than £5,000 in savings, which would help pay bills for only a few months depending on their location.
Walton thinks the protecting industry focuses too much on gage debt.
He explains: “Although this is essential, it represents at best 359% to 30% of a household’s outgoings. There are therefore around 70% of household outgoings still at risk. Advisers need to talk about the wider risks and help customers understand that they can and should cover their entire lifestyle.
Varsani agrees, saying: We need to move on from this format of advice [mortgage protection] and adopt a holistic approach to lifestyle protection. Our clients have more to their lives than a mortgage, assuming they even have a mortgage. Client demographics have changed and it’s time our advice processes did also.
There is plenty to cheer about, though, which our interviewees are happy to share.
“Wellbeing has been a core focus, especially mental health, and these conversations naturally have move across into thef financial where people work challenges,’ says Richard.
Walton thinks the Consumer Duty is win for 2023, saying: “This will ensure a focus reviewing existing customers’ needs, making sure they have the right protection.”
Meanwhile, Varsani is excited to see Guardian introduce its income protection proposition.
“I hope this can bring about a shake-up across all providers to introduce enhancements to their own offering, he remarks.
And Smith closes this look protection with a positive reminder for brokers.
“Record maturities mean record opportunities to have conversations with existing customers who have no or little cover in place.
This opportunity must not be missed.”
This article was published in the Mortgage Strategy magazine April 2023
Written by Gary Adams