25 February 2019

Younger consumers addressing protection needs too late in life

4 min read

 
Meera Khanna, Consumer PR Manager

Meera Khanna

Consumer PR Manager - Protection

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• Three- quarters (74%) of Independent Financial Advisers (IFAs) believe that younger consumers are addressing their Protection needs too late in life
• Nearly nine in 10 (87%) advisers agree that Income Protection (IP) is ‘massively undersold’, potentially creating opportunities for both advisers and younger consumers
• One of the barriers to recommending IP is that it is perceived to be too expensive yet a gym membership is twice the price

New research by Royal London shows three quarters (74%) of IFAs believe that younger consumers are not addressing their protection needs early enough, with two in five (43%) advisers struggling to attract clients under the age of 35.

Nearly nine in 10 IFAs (87%) agree that IP is undersold in the industry, with the main barriers to selling or recommending the product being a lack of awareness of IP among clients (52%). Affordability was another obstacle for selling IP according to 51% of advisers despite the fact that, on average, income protection is cheaper than a monthly gym membership.

Cost of Income Protection

A barrier to selling IP to clients was that it was perceived to be too expensive but Royal London found that a gym membership is more than double the price of IP. Monthly gym membership fees in the UK are estimated to be £40.53. In comparison, a 30 year old, non-smoking male working as an administrative officer could get £18,000 income protection for full term with a 13-week deferred period for less than £20 a month.

Protection gap

Seven in 10 (72%) advisers agreed that the protection gap is increasing, while six in 10 (63%) feel that protection products need to be tailored to fit the needs of the changing lifestyles of consumers.

IFAs were divided on the likelihood of providing protection to those working in the “gig economy”. Three in 10 (29%) believe the gig economy presents an opportunity to the income protection market, with some advisers seeing it as a chance to engage with a market that is typically underinsured. However, some advisers saw the rise of freelance work as a threat for the industry (28%), mostly because the irregularity of work and income could make it harder for clients to commit to spending on protection plans.

Jennifer Gilchrist, protection specialist at Royal London, said:

“It’s clear from the research that we need to raise awareness of the benefits of income protection, especially amongst younger consumers. As part of this, we need to tackle the perception of protection being expensive. There is a whole range of options that can be personalised to individual budgets and customers often tell us they are pleasantly surprised when they find protection isn’t as costly as they anticipated. Customers are at the heart of what we do, so any insight into their needs is valuable in helping us to provide better outcomes for them which will help to bridge the protection gap.”

The research also shows that the key factors providers should consider when developing new products are the life expectancy of those with chronic illnesses increasing, changing family dynamics and the rise of the “gig economy”.

Notes to Editors

1.     Opinium on behalf of Royal London surveyed 205 UK Independent Financial Advisers between 7h and 13th November 2018. The survey was carried out online.

2.     According to findings from Deloitte and Europe Active, UK gym memberships cost around £40.53 monthly.

3.     A 30 year old, non-smoking male working as an administrative officer could get £18,000 income protection for full term with a 13-week deferred period at a monthly premium of £19.53.

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.

For further information please contact:

Meera Khanna, Consumer PR Manager