Being an adviser can be an incredibly rewarding and fulfilling job. Your customers look to you for support and guidance as they take important steps through life such as owning their first home, which can be a truly incredible experience. However, there is more to the role than this, which can involve sitting your customers down and having some difficult conversations exploring what could happen to their dependents following a serious injury, illness or even death. The role of a protection adviser is one that requires great patience and understanding to navigate these heavy dialogues, which you can learn more about here if you are interested in pursuing a career as an adviser.
According to a recent article published in International Business Magazine, only 9% of the adults in the UK have taken out some form of income protection which is incredibly concerning. Meanwhile, the figures for the number of UK adults owning similar forms of protection such as critical illness cover is just as dismal, standing at only 7%. This is why we have put together this article, which we hope will shed some light on the challenges facing brokers and advisers as they try to get their client’s long-term finances secured with the right protection policies.
What are the Different Types of Protection?
There’s a wide range of protection insurance products on the market that advisers should be already aware of, but just to make sure you have a solid understanding of some of the major policies out there or just want a quick refresh we will go through them here.
Personal Protection
- Income Protection – a long-term insurance policy which pays a client’s regular income in the event they cannot work due to illness or injury.
- Life Insurance – probably the most common policy you are requested to arrange. Life insurance supports a client’s beneficiaries with a lump sum payout in the event of their death. Learn more here.
- Critical Illness Cover – covering a variety of critical illness diagnoses, this policy offers a one-off payment to help with costs while you go through treatment.
- Family Income Benefit – definitely one of the less frequently requested protection types, Family Income Benefit provides your dependents with regular financial support in the event of the policy holder’s death or illness. Learn more here.
Business Protection
- Key Person Protection – many advisers aren’t asked to arrange business protection policies as often as personal protection ones, but it’s still essential you have some knowledge of the different types. Key person protection for example protects a business from losing profit in the event they lose an employee with high standing amongst the organisation.
- Executive Income Protection – similar in concept to Income Protection insurance, this policy covers a percentage of the income lost due to incapacity to work. Key Person Income Protection can also be arranged which offers protection in the event a key employee is unable to work.
How Many People Own Some Kind of Protection Policy?
The market for protection insurance has seen a drastic increase since the COVID-19 pandemic which saw the public practically rush out to obtain some peace of mind with the state of their long-term finances. As of 2022, individual and group policyholders have received up to £6.25 billion worth of insurance pay-outs, a staggering figure that can be attributed to a consistently high claims acceptance rate of around 98% and a steady increase in the number of protection claims submitted. In short, the market for protection is in a healthy place and should be something any adviser looks to focus on in order to better help their client base. There are still plenty of obstacles to overcome in making your clients aware and understand the need for a protection policy, which is why we have compiled some of the research showing the primary reasons the UK public is reluctant to arrange a policy.
Why Do People Decline a Protection Policy Arrangement?
Even though the market for selling protection appears promising, there are still a number of obstacles facing advisers which can make arranging policies difficult. Some clients will be completely open to the concept of arranging a protection policy without needing persuasion, with the long-term financial stability of their loved ones already a priority. Others may have some reservations, possibly due to a lack of understanding of what their options are when it comes to the various protection products. Then there will be those that have decided against taking out some kind of protection policy, with some of the most common reasons including the following:
- Costs – any protection policy is an expense, and to some it is seen as an unnecessary one. In times like this with the cost of living crisis and rising mortgage rates, customers may feel they need to prioritise other areas of their budget.
- Savings – savings are there to be used in an emergency or just in a situation where extra support is needed. Most UK residents have some sort of savings to fall back on in the event they are unable to work, but the amount is said to vary greatly from household to household. This means if their illness or injury stops them from working for years then their savings alone won’t be enough to support everyone.
- Government Support – in the UK, statutory sick pay can maintain the average worker’s lifestyle for up to 28 weeks. But again, if they are unable to return to work after their benefits have ended, where does that leave them?
- Payouts – a common concern of policyholders is that they will not receive a payout from their policy due to some loophole or minor issue preventing them from ever benefitting from their insurance. In truth, the rising number of protection policy cases being arranged is somewhat owed to its exceptional 98% payout rate.
What You Can Do To Arrange More Protection Insurance Policies
Around 8 in 10 households in the UK are concerned about at least one issue negatively impacting their ability to work and bring in a steady income as a result. Following on from the COVID-19 pandemic, the current cost of living crisis has placed an even greater focus on primary earners within UK households to have long-term support systems in place if they are unable to continue working. This is exactly where the need for protection lies and where advisers must be able to illustrate its importance.
Industry experts, which include some of the top advisers in the UK, have stressed the importance of repositioning and how it is integral to helping clients view protection as a necessity. This involves reframing your conversations around protection so that clients are made fully aware of the positive outcomes it delivers, as opposed to the costs it incurs. Another useful approach is to integrate quantifiable assets into your discussions such as comparing your client’s income and earning potential to the value of their other assets. This will often lead them to confirm just how important maintaining and working towards achieving their earnings, thus demonstrating tangibly how important a protection policy is for themselves and their beneficiaries.
Perhaps an often-overlooked technique to employ during your discussions is to actually make a greater effort to involve your clients when it comes to suggesting and rejecting the different protection solutions on the table. Rather than simply talking at your clients and making them feel as if the only choice they have in the matter is whether to say ‘yes’ or ‘no’ right at the end of the journey, advisers should instead make them feel more included throughout the process including at the stage of preliminary discussions where different policies are first identified.
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