Progress has been made in turning around protection market sales and the latest quarterly data has shown increased demand for income protection is continuing apace.
But the protection gap persists, particularly among those with chronic conditions, gig workers and young renters.
Providers are not blind to these issues and product design has responded but advisers believe there remain areas in need of greater support.
And while the stick of the regulator’s Consumer Duty and Market Study looms large over the sector, the rewards of ensuring more customers are protected remain clear – that of creating happier and healthier workforces and a society at large.
Individual protection sales up
According to data from Gen Re released late last month, sales of new individual protection insurance policies rose very slightly in 2024 with a strong fourth quarter completing a turnaround from a weak start to the year.
The data showed 2,015,559 individual protection policies were sold last year, 2,492 or 0.1% more than the 2,013,067 completed in 2023.
However this annual total was around 100,000 fewer than in 2022.
Encouragingly a particular bright spot was in income protection where sales rose 15% across the year to 287,000, up from 249,000 in the previous year.
Long way to go
But while Joanna Streames, owner of Velvet Mortgage Insure Services, notes good progress has been made in expanding the reach of protection – particularly with younger buyers and first-time homeowners – coverage is still “very low” overall.
“There’s a long way to go when it comes to reaching people with neurodiverse conditions, fluctuating mental health, those with chronic illnesses that don’t fit tick-box underwriting,” Streames tells Health & Protection.
“This also includes groups affected by social inequality such as lower earners, carers, or people without regular access to financial advice.”
But Eastern European communities and ethnic minority groups often face language and trust barriers that leave them unprotected, Streames continues.
“Too many people still fall through the cracks simply because the system wasn’t built with them in mind and there is a lack of understanding from the public on the access to advice that is available to them,” she adds.
According to Sheun Oke, managing partner and CEO at Emergenzz Financial Services, some community-specific health conditions, such as Sickle Cell Anaemia, are leaving certain customers locked out of mainstream insurance coverage.
“This is a significant gap that requires urgent attention,” Oke tells Health & Protection.
Business community
But even the protection gap also extends to UK plc, according to Mike Farrell, protection sales and marketing director at LV=.
“The business community remains an underserved market, presenting a clear opportunity for growth,” Farrell tells Health & Protection.
“We are committed to helping advisers navigate this space by providing training that simplifies business protection and equips them with the necessary tools and techniques,” Farrell adds.
But Jo Miller, co-chairwoman of the Income Protection Task Force (IPTF), says real progress is being made in identifying core underserved audiences.
“This has been evident not least in our own recent report in association with Iress,” Miller says.
“However, success is still skewed toward those in more stable, higher-income roles, or those with an adviser already in place.
“People with more predictable finances, fewer health concerns, or mortgage-linked needs are still the ones most likely to be served well.”
Simplifying products and language
But customers cannot be reached effectively if protection product ranges are impossible for customers to understand.
Alan Lakey, director at Highclere Financial Services, maintains the industry needs to ensure customer conversations and marketing uses understandable phrases and words as opposed to acronyms and industry-speak.
National Friendly is one such an insurer that argues it has taken that message on board.
Graham Singleton, CEO of National Friendly, tells Health & Protection the mutual has taken steps to simplify its products.
This has included speeding up application processes, and expanding its underwriting criteria to include conditions traditionally declined for income protection, such as type-2 diabetes, HIV, and Crohn’s disease.
Though Singleton notes advisers are on the frontline and remain key to helping clients understand their options.
“We’re committed to working closely with them to provide clear, concise materials and ongoing training,” Singleton says.
Julie Godley, director of intermediary, retail protection at Legal & General, maintains a commitment to innovation and adviser support is “pivotal” in growing the protection market.
“Supporting advisers is not just about providing tools and resources,” Godley says.
“It is also about fostering a culture of proactive engagement, which leads to better customer outcomes.
“By doing so, they can ensure a more inclusive market where all customers are adequately protected.”
Greater penetration into mortgage market
An obvious avenue for advisers to discuss protection is when customers take out a mortgage.
According to Alan Waddington, distribution director at Cirencester Friendly, over the past couple of years, the mutual has seen greater penetration and conversion of protection alongside mortgages.
“The networks have shifted their approach, no longer relying on large protection-only firms to balance out the ratio of protection to mortgages and are working harder to ensure more firms and advisers are having protection conversations,” Waddington says.
“We are also seeing an uptick in wealth managers ensuring income protection is in place as part of their long-time financial planning guidance.”
Beyond mortgages
Though Jennifer Gilchrist, protection specialist at Royal London, agress the purchase of income protection is increasing.
“This suggests demand for this product is expanding beyond just being sold at the point of taking out a mortgage,” she says.
“This has led to numerous product changes from most market providers, similar to the evolution of critical illness (CI) coverage when the number of CI conditions became a value measure.
“Insurers and advisers want to grow the reach of protection products and successfully identify those populations.
“How is this being done at present? What can be improved upon and which groups of people are being successfully served by the market?”
Tailor policies to renters
A key market advisers need to reach remains renters.
Alan Knowles, co-managing director at Cura Financial Services, tells Health & Protection: “In my opinion the products we have work.
“We don’t need new plans, but existing plans do need tweaking to keep up with the times.
“Rather than creating new policies like rental plans, the existing policies could have been adapted to suit renters.
“We do need a greater choice of deferment periods on income protection and more moratorium-based underwriting options, especially for income protection, would help too,” he adds.
Consumer Duty and Market Study should not be catalyst
The Financial Conduct Authority’s (FCA) Consumer Duty and freshly launched Market Study have highlighted that reaching underserved customers is now more of a regulatory requirement than ever.
However Jack Southcott, head of protection proposition at The Exeter, maintains these should not need to be the driver that pushes the industry to better understand the needs of customers and the value the sector provides.
“These are things that we have long been investing in and must continue to focus on delivering,” Southcott says.
“As an industry we need to hold each other accountable for the outcomes we deliver and collaborate effectively to meet customer needs in a sustainable way.
“We are an industry that always reacts positively to challenge and change, and we need to ensure we remain committed to this way of working so we can protect more people through high-quality products that deliver genuine value and enable growth.”
Working towards healthier society
Daren Boys, protection portfolio distribution director at Aviva, agrees, adding the picture is bigger than just regulation and censure for non-compliance, although that is important for all parties involved.
“Most importantly, it is a human story,” Boys says.
“At an individual and family level, it’s about ensuring that working-age adults become more financially resilient to life’s challenges and continue to support their families to grow and thrive.
“At a societal level, it means building a more resilient workforce that is more productive, better supported to return to work after illness, and better able to contribute to the economy and society.
“It’s also important that advisers and providers serve more of those with unmet protection needs, helping them grow their businesses and close the protection gap.
“Delivering on Consumer Duty outcomes clearly helps achieve these aims, as we hope that any changes from the Pure Protection Market Study will too.”
Supporting recovery and return to work
According to Peter Hamilton, head of market engagement at Zurich, the insurer has long had a focus on rehabilitation solutions, supporting recovery and return to work.
“It’s encouraging to see that this is likely to feature prominently in policymaker discussions on keeping Britain working,” Hamilton says.
He notes that some product developments have been in response to a different customer problem – that of NHS waiting lists.
“The NHS is facing unprecedented pressures, and the need for alternative routes to care is clear,” Hamilton continues.
“Monthly cancer referrals have risen dramatically.
“Despite efforts to streamline care through the NHS Faster Diagnosis Standard, introduced in October 2023, to ensure a diagnosis within 28 days, performance data shows challenges remain.
“The percentage of these targets being met in different areas varies greatly, with an element of a postcode lottery.”
So the insurer has sought to give more choice than standard medical care with faster access to consultations, diagnostics, and second medical opinions.
“It’s an example of growing the market and taking it in a different direction to our core protection products,” he adds.
Picking up the point, Nick Telfer, head of protection development at Vitality, adds: “While the need to do right by your customer and provide the right products isn’t anything new, it is only by continually challenging ourselves to provide the best products that fit today’s needs and deliver real tangible value, that we can we be sure we are doing right by consumers.”
