Protection review

Time to think again about protection advice

Mike Allison

head of protection, Paradigm Mortgage Services

At a time when most adults are experiencing health and financial challenges like never before postCOVID, due to increased demand for NHS services or financial pressures triggered by the cost-of-living crisis, clients may need more help than ever from protection advisers to help ease the potential burden.

For some time, the Deadline to Breadline report commissioned by Legal & General has highlighted the lack of cash most households have to pay their bills. In their last report – commissioned in April 2020 – we saw the average family was some 24 days away from the breadline – far less than the 90 days many believed they had.

The most recent report is due to be published some time in September 2022, and the snippets I have picked up indicate all that we would imagine – namely, that that figure hasn’t got any better

The Exeter also produced figures recently to gain a deeper knowledge of the challenges facing UK households, surveying 2,000 employed and 2,000 self-employed adults to understand their health and financial fears during a time of record NHS waiting times and increased living costs.

They also wanted to understand consumers’ views on insurance (income protection, health insurance, life insurance, and cash plans). Less than one in ten (eight per cent) said their reason for not buying protection and health insurance was because they didn’t know what the policies were. So, if awareness of the products is high, what’s stopping people from buying?

There are the traditional barriers that are flagged in pretty much all of this type of research – namely affordability, claims, and communication.

The industry has done a lot of work in trying to dispel these myths, certainly in the income protection space, and hopefully that has had some positive effect on IP sales this year, which appear to be ahead of last year from what I can gather.

What most of this research does is to identify risk, and in many cases we rely on advisers to get that message across in conversations with clients at point of sale, especially where mortgages are involved.

We know that the average age of an IP claimant with L&G last year was 40, and we also know from various research that the average age of a first-time buyer is around 35 years.

With the consumer duty rules comes the need to explain fully to consumers what products and services are available to them, and research such as that mentioned above should provide extra food for thought when those discussions are taking place. It should certainly inform why certain insurances were recommended.

With uptake of insurance among the self-employed low (46 per cent not having an income protection, health insurance, life cover, or cash plan product in place), we really need to rethink the material we use to emphasise to clients the need for protection.

The challenge will be more pressing for many mortgage advisers speaking to clients coming out of two- or five-year fixed-rate mortgages who began with a one or two when they were implemented and are now starting with a three- or four-figure, which will have a huge impact on available cash. The easy thing to do would be to avoid the conversations on life and income protection and kick it down the road until times get better

Exeter Research tells us that 39 per cent of working adults over 18 years old in the UK save less than £100 in a typical month, with one in seven (14 per cent) saving nothing. Of those who do save, respondents in London are most likely to put away more than £100 a month, with only 20 per cent saving less.

But this varies by region. Almost half of those in Yorkshire (47 per cent) and the east of England (45 per cent) save less than £100 a month, showing the absolute need to help clients cope through protection when their need will be greatest.

Advice will be critical in raising awareness – and with inflation set to be at double-digit levels for some time to come, we should also be highlighting the need to review the amounts regularly and/or look at ticking the “indexation at RPI” box – something that hasn’t been done for some time, according to many insurers. Likewise, for those recommending GI it is important to review rebuild costs and costs of replacement items on a regular basis due to inflationary pressure.

Overall, this is a difficult time for many, with incomes under considerable pressure. The need for protection advice has never been greater, and if we as an industry can be clear in terms of our communication to clients about the benefits to be had from such policies, then I fully expect you’ll find a client base willing to listen and take the advice presented to them. M I

Can government solve the housing crisis?

Shaun Almond

MD, HLPartnership

It is interesting to note that there have been twenty housing ministers since 1997 and eleven since 2010. Using this metric, that statistic perhaps shows where successive governments have placed housing issues on their list of priorities. Housing ministers have barely had time to be read into their brief when they are summoned to ‘greater’ things or walk off into ministerial oblivion.

Regular target promises for newbuild properties have been announced with a magician’s flourish, only to fail and be wheeled out again

TCF took us along the path to making sure that client advice and action aimed to be fair to clients. Consumer duty introduces a whole new level of responsibility that overlays the principles of fair dealing

as new initiatives when government needs some diversionary good news.

However, the real-life facts show that for all the fanfare, delivering on promises is more difficult to do. Housing programmes delivered by Homes England resulted in 38,436 new houses starting onsite and 37,164 houses completed between 1 April 2021 and 31 March 2022, as the sector began to recover from the COVID-19 pandemic.

Of course, government attention has been taken up by COVID over the past three years, followed by the increasing headaches in the wake of the Ukraine invasion, which in turn have led directly and indirectly to the cost-of-living crisis – and all of this has not been helped by the Tory leadership contest.

But, given a more settled backdrop, what should be government do to close the gap between aspiration and reality? How about a wish list including the following?

 Appoint a minister for a long-term stint with some proven experience in housing and the backing of the

Treasury and other ministries to deliver real results.  Stop treating planning reform as a political issue.  Take a long look at the undersupply of social housing.

Housing charity Shelter calculates that 3.1 million more social dwellings need to be produced in the next twenty years.  Consider radical reform of the whole process of home purchase – and act on it.  Stop the persecution of the private rental sector. Private landlords are not the enemy.

PROTECTION AND CONSUMER DUTY

While we all wend our way through the fine print surrounding the impending arrival of consumer duty, the basic elements should be making us all aware of the changes we are going to have to make to stay compliant. Anyone familiar with my monthly articles (thanks, mum!) will know I am particularly passionate about protection as part of the mortgage conversation. Consumer duty expects that all advisers will be able to demonstrate their commitment to best client outcomes. TCF took us along the path to making sure that client advice and action aimed to be fair to clients. Consumer duty introduces a whole new level of responsibility that overlays the principles of fair dealing.

Ensuring best outcomes must, by definition, mean we have to extend the effort we put into the protection conversation. Introducing and discussing protection will now only be a starting point, and for those advisers who do not currently engage at all in the protection proposition, consumer duty is going to be a massive wake-up call.

Brokers, whether DA or AR, will need to look very hard at their processes to be able to demonstrate when asked (and they will be) that they have indeed advised and not just delivered a prepared script and then ticked “Not interested” in the box.

There is bound to be an increase in referral services for DAs who want to concentrate solely on their clients’ mortgages. For ARs, the kind of service offered by their network principals is going to be crucial. At HLPartnership, we have just appointed our second protection specialist to provide group and one-to-one training not only on the products and what they offer, but also on the psychology of introducing and demonstrating the advantages as well as overcoming objections. Our aim is to increase the volume of complementary protection policies for both new and existing customers substantially by working closely with our members to grasp the opportunity for closer client relationships by widening the breadth of the advice they offer . M I