Your views: Advisers blame ‘Britishness’, Superman Syndrome, and comparison sites for protection gap in the UK

According to Newspage, advisers have seen a growing majority of people ignoring or even cancelling Life, Critical Illness (CI), and Income Protection (IP) because it’s a “luxury” they can’t afford.

Related topics:  Your Views,  Newspage
Tabitha Lambie | Editor, Protection Reporter
29th September 2023
"Our Britishness, specifically our ‘stiff upper lip’ approach to life, cynicism and hatred of being sold to are certainly major factors. "
- Dave Corbett, head of protection at Protection 1st

Discussing the protection gap in the UK, Dave Corbett, head of protection at Protection 1st, said that “the simple fact of being British sees many Brits avoid taking out insurance.” He believes that “our Britishness, specifically our ‘stiff upper lip’ approach to life, cynicism and hatred of being sold to are certainly major factors.”

“Add in confusing add-ons from providers looking for market share, the press focusing in on the tiny percentage of cases that don’t pay out, a toothless regulator that allows call centres to peddle out inferior products, the use of poor sales tactics, and the level of paperwork we are required to send out to clients, and you can see why so many people remain uninsured,” he explained.

In a similar vein, Elliott Benson, mortgage broker at Sett Mortgages, blames Superman Syndrome for the protection gap. He said that people are “absolutely not taking mortgage protection seriously enough […] Despite knowing the risks, most people have Superman Syndrome and will not entertain the idea that anything could happen to them, which, of course, it very much can.”

Of those that were protected, advisers said a growing majority are ignoring or even cancelling Life, Critical Illness (CI), and Income Protection (IP) because it’s a “luxury” they can’t afford while more and more people are purchasing policies on comparison sites “for convenience sake.”
Simon Bridgland, director at Release Freedom, said he’s seen people struggling with living costs who’ve had to “deep dive into their outgoings and start culling what they deem to be unnecessary payments.” This has resulted in customers cancelling life insurance and other protection policies which Bridgland said was “incomprehensible.”  

“Who else is going to pay the mortgage to keep a roof over your head?”

Stephen Perkins, managing director at Yellow Brick Mortgages, agreed that customers need to rethink their priorities. He felt that “Too many homeowners do not fully consider the need for protection […] they either think they are untouchable and nothing bad will ever happen to them or simply want to avoid any optional cost, but will still pay hundreds a month on Sky TV and pet insurance.”

Likewise, Perkins found it “baffling” that customers still turn to comparison sites to purchase protection products. He believes these services are “self-defeating for the industry,” failing to address “the shortfall and risk needs you have, and that it will pay out when needed.” Instead, comparison sites focus on “the sum assured, arbitrary Defaqto star ratings that have no value and, sadly, mostly on the premium.” Perkins explained that this leads to customers “taking out the wrong types of coverage, for the wrong amounts, with poor quality insurers and then being left in the lurch when the worst happens and the policy they thought would protect them doesn’t pay out.”

“Protection should be an advised-only product to ensure informed decisions are made.”

Lewis Shaw, founder of Shaw Financial Services, said that comparison sites are a “scourge” and that insurance is often an “afterthought when it should arguably be a more significant focus than even the mortgage.” He believes that “consumers often aren’t aware that insurance providers know that when people jump online, they will typically be searching by price, so they strip out elements of their cover to make them competitive.”

“It’s a false economy and can leave people high and dry when they need financial support the most.”

Emma Jones, managing director at When The Bank Says No, has also seen customers using comparison sites “to find the cheapest cover but the quote never takes into account any health declarations.” She recommends that customers speak to an experienced insurance adviser who will “ensure medical history is declared correctly so that the policy actually pays out when it’s needed."

Considering the impact of comparison sites on IP sales, Scott Taylor-Barr, director of Barnsdale Financial Management, said “There is a saying that we ‘lease our lifestyle’ paying for everything we have and need each month […]It all goes very wrong, very quickly, of course, when that income doesn't arrive.” For this reason, he believes IP is “one of the most important insurance policies people should have on their radars.” But with comparison sites, “we have seen time and time again that the result for the customer is generally a poor one.”

“With the primary motivating factor for these searches being price, not quality of cover, insurers reduce cover as they chase the lowest premium to be at the top of the search.”

“Only if the client needs to claim do they find out the cover limitations of that cheap price, and then it's sadly too late," he concluded.

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