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LifeSearch Home > Protection Reports

Protection Report No. 8 (page4)

ASK ME. ASK ME. ASK ME

87% of people feel they would not be comfortable giving advice to a friend on the most suitable life or critical illness insurance policy.

If people cannot give advice to a friend or family member on the best product for their needs, how can they be confident advising themselves? Many people treat protection in the same way they treat general insurance such as motor or travel insurance, when in reality protection is much more complicated and important to get right. If you make a mistake with your car insurance you may lose out on a few hundred pounds, before you realise your mistake and switch the policy. If you make a mistake with protection it normally involves hundreds of thousands of pounds and only comes to light when you are either dead or critically ill. By then it is too late to turn back the clock.

Our research clearly shows the need for good advice in protection. We are not saying that consumers cannot make their own decisions, but they must first be given all the information they need to make an informed one. They do not get this information from banks, building societies, supermarkets or websites.

47.5% of people said life insurance would be the most suitable product to protect themselves and their family. Critical illness was ranked second at 24% and 23% thinking private medical insurance the most suitable product to consider.

In a report issued by Which?, they stated that Income Protection should be the consumer’s first consideration when it comes to protection products. (But with so many well known outlets not selling this product, it is unlikely that this will be the case.) LifeSearch agrees with Which? and is currently bucking the trend with increasing sales of income protection. But more needs to be done within our industry to make the most suitable products more accessible for consumers.

20% of UK adults think that no protection product is suitable for them. The UK faces a £2.4 trillion protection gap, and so unless people believe in the importance of protecting their incomes and lives this figure might just continue to grow. More women than men feel that protecting their mortgage payments is a good idea. Although they believe that a mortgage payment protection policy (MPPI) is the best way of doing so. MPPI policies are grossly oversold by banks and building societies because of the extremely high profits the sales generate.

LifeSearch believes that Income Protection is almost always a better option for consumers. Instead of covering just your mortgage payments it will cover your entire salary if you are unable to work due to ill health. Income Protection can also be set to pay until retirement age, whereas MPPI pays out typically for only 12 months.

65% of the most likely age group to be buying protection (25-34 years olds) are in the dark as to their rights to compensation. When surveyed they had no idea that when buying protection non-advised, they may be signing away their right to redress from the Ombudsman.

84% of us would feel that we were being treated unfairly if we bought an insurance product which was not as suitable as another might be, just because we spoke to the wrong adviser.

Nationwide, for example, has a two-tier process when it comes to buying protection. The mortgage adviser can inform you of related products, such as buildings and contents, life insurance and MPPI. But you would need to see a financial consultant to talk through more complex protection and financial products. However you would have to make an appointment to see the consultant. Not many take the second option but it is at that second appointment that you would find out about products such as Income Protection which is a much more comprehensive product than the MPPI sold by the first adviser.

The first adviser gets away with not having to mention the other more suitable protection products, by claiming that his or her part of the sale is non-advised. How is this fair and transparent? Nationwide, proud to be different.

Survey conducted independently on behalf of LifeSearch by www.tickbox.net 11-17 November 2005. Total survey sample base: 1,664.

There seems to be little doubt of the fundamental benefit to advisers and their clients when it comes to knowing how many claims any provider rejects and on what grounds. However, because of the lack of a uniform way of reporting those figures, there appears to be a significant danger of trying to compare numbers that are not compiled over the same time period. Financial Adviser, March 2006. Some insurers seem to have a better record at honouring claims for critical illness than others. But the figures are skewed by how long a provider has been in business. Sunday Telegraph, February 2006.

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