General Insurance review

Bridging the gender gap in financial literacy and confidence

Emma Green

director of distribution, Paymentshield

The narrative around women and finance is often not a positive one. Whether it be the gender pay gap, the cost of unpaid care work, or the financial effects of the pandemic, the odds never seem to be in women’s favour.

Women also don’t seem to fare as well as men when it comes to financial comprehension. Last year, a major international study conducted by researchers from Germany, the Netherlands, and the US found that, on the whole, men are more financially literate than women, with stronger performance in financial tests.

However, the same study also showed a serious disparity in confidence, which the researchers credited with driving the financial literacy gender gap. Women are more likely to plump for a “don’t know” answer if there is one – but, in the words of one of the researchers, “When you force women to give an answer, they often actually do know.”

This gender gap is something that emerged in a recent YouGov survey we conducted with 2,059 UK adults. When we asked respondents about their understanding of the mortgage process, only 52 per cent of women described theirs as “good,” compared to 58 per cent of men.

The gender difference was more notable, however, when we asked questions that related directly to confidence. When we asked respondents how confident they are that they understand the jargon used to explain financial products and services, one-third of women (33 per cent) said they were not confident, compared to one in five men (19 per cent).

Likewise, when asked why they would avoid asking a financial adviser a question regarding their financial situation, 18 per cent of women said it is because they struggle to understand or are intimidated by jargon, compared to just 12 per cent of men.

Moreover, women seem to feel overwhelmed by financial decisions more often, with 21 per cent of female respondents saying they find managing their general finances overwhelming (compared to 14 per cent of men), and 24 per cent saying they find buying insurance overwhelming (compared to 15 per cent of men).

So what does all this mean for advisers? Well, clearly, it’s important to recognise the need to tailor the communication approach to each individual client. However, advisers may not be aware of just how different men’s and women’s relationships to finance are.

While age, experience, profession, or even economic status might seem like obvious conversational filters, in 2022 gender might not seem like it requires much nuance in communication. Yet the research suggests otherwise.

Obviously, this doesn’t mean being patronising. But it could mean explaining technical terminology or taking advantage of resources such as Paymentshield’s customer guides and jargon-busting glossary as a pre-read or follow-up to client conversations, or even using explanatory videos if clients would prefer to receive information in an alternative format.

We also know that women are more likely than men to feel that they don’t know which questions to ask. Tackling this by talking through popular client FAQs is a good approach, as is checking the client’s understanding before moving on, or ensuring there are plenty of opportunities to invite questions.

Our research also suggests that women would appreciate being offered more extensive support. When asked whether they would expect advisers to review their home insurance needs at the same time as a remortgage, 40 per cent of women said they wouldn’t necessarily expect it, but they would be happy if advisers did so, compared to just 31 per cent of men.

This indicates that women might be more receptive to receiving more holistic financial support – in turn, presenting advisers with an opportunity to strengthen the client relationship.

Advisers don’t need us to tell them that there’s no one-size-fits-all approach to advice, but they might just be surprised by some of the gender differences thrown up by recent research – and it pays to take note.

As for wider society, it’s great to see various financial inclusion and empowerment initiatives out there – from both the public and private sectors – to try to bridge that confidence gap.

Across the Atlantic, we’re already seeing the gap start to close. The US Bank’s 2022 Women and Wealth Insights study, completed very recently, shows that women are closing in on men when it comes to financial confidence, with just a five per cent difference between the two groups, compared to 13 per cent two years ago. The research showed that younger women are significantly more confident, too – a really positive sign that will hopefully be replicated among each new cohort. Closer to home, we’ll be continuing to monitor gender differences in our research surveys, and I’m hopeful we’ll see that same trend emerging in the UK, too. M I

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,059 adults. Fieldwork was undertaken between 1 and 4 April 2022. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

In an age of uncertainty, we must be better prepared

Geoff Hall

chairman, Berkeley Alexander

As a commentator from Ernst & Young recently said, there’s never been an era when the world was more in need of a high-performing insurance industry. As brokers and advisors, you are on the front line of this charge.

Speaking at the British Insurance Brokers’ Conference, mayor of Greater Manchester Andy Burnham commented that “the reality of the times we are living in is that the shots are coming at us with huge pace and regularity that we have never seen before … people are being forced to live life close to the edge.”

Clients have a greater need for insurance services than ever before, but just as important, they need quality advice on how to reduce risk. We’re living in a volatile global environment and a challenging risk landscape – illness, cyber and terror attacks, high general cost of living, and natural disasters – meaning that both personal and commercial clients are being asked to weigh what level of risk they are comfortable living with in their everyday lives, as well as to look for ways to protect themselves from unpredictable disruptions and build resilience against emerging risks, all whilst managing their outlay (otherwise known as “looking for the cheapest deal”).

Risk management is at the top of clients’ agendas, whether they realise it or not. Therefore, it must also be at the top of yours. You don’t need to be a “risk management” expert; much of it is common sense – and we know it, but clients may not.

The old adage is true: prevention is certainly better than cure. For your personal lines clients this means advice on home maintenance – for instance, keeping up with property maintenance issues such as annual cleaning of guttering to prevent costly damage farther down the line; tree maintenance to help prevent subsidence risks; and, of course, income protection. For commercial customers, advice on cyber protection, identifying potential gaps in cover, and employee benefits would be welcome.

Competition is fierce, so if you don’t respond quickly and innovatively to help them protect and reduce their risk exposure, you might lose them to an intermediary that will.

EVALUATING THE COST OF UNDERINSURANCE – TIME TO GET THE CALCULATOR OUT

It may shock you to hear that according to Rebuild Cost Assessment Ltd, currently nine out of 10 buildings in the UK that are under a sum insuredbased policy do not have the correct sum insured. Twenty per cent of policyholders are overinsured (on average by almost 160 per cent), whilst 80 per cent are underinsured.

Issues with global supply chains are pushing up the price of building materials. This is further compounded by rising inflation rates, which are expected to peak at 10 per cent or higher before the end of this year.

The issue of both over- and underinsurance has plagued the industry for years, and the Insurance Act and recent FCA thematic reviews have highlighted how the insurance industry should be doing more to ensure policyholders purchase appropriate levels of cover. This is an opportunity for brokers and advisers to take the lead.

Have the conversation with your clients – particularly mid- and high net worth clients and those with commercial or investment properties. Check their buildings sum insured, ask when they last had a rebuild valuation, and identify whether index linking has been applied. Also, suggest they invest in a survey to ensure they are not at risk of underinsurance. Surveys can be conducted at any point in the policy life cycle – pre-cover, midterm, or at renewal.

Your GI provider should be able to help you with this. Here at Berkeley Alexander, for example, we have a new desktop rebuild cost-calculator service, developed in partnership with RICS regulated firm Rebuild Cost Assessment Ltd, that aims to eradicate the problems of over- or underinsurance.

Support your clients in setting an accurate sum insured and ensure they pay an appropriate premium for the right level of cover.

GET BACK TO BASICS

The pandemic and its aftermath have certainly shone a light on the need to get back to the basics of traditional customer service. In a recent survey by Forbes.com, 96 per cent of consumers say customer service is an important factor in their loyalty, whilst one in three people says the most important aspect of customer service is speaking with a knowledgeable and friendly agent.

Sure, some people prefer the convenience of going online for insurance, but others can be deterred by the lack of human interaction when knowledgeable advice is needed, especially when, as mentioned above, we are living in such risky times.

When it comes to improving service, brokers and advisers must be consultative, not transactional. It’s about building stronger relationships, being purpose-led in interactions, and being proactive and prompt when responding to client needs. It’s time to get back to basics. M I