Nudges at milestone moments in life could be key to closing the gap among certain communities who are not even at “first base” in their understanding of protection insurance.
This is according to Ed Smith, director at the Financial Conduct Authority (FCA), who was speaking on Thursday marking the 10th anniversary since the Protection Distributors’ Group’s (PDG) launch.
Not even at first base
Smith told the audience that while he was not surprised that there was a protection gap, the same could not be said about the fact that some consumers were not even considering their protection needs.
“So they’re not even at first base in terms of asking the question, what protection needs might I have?
“You are starting at that real level of disengagement. And I think that was a surprise and a challenge for us.”
Gap is not uniform
But Smith also pointed out that the protection gap is not uniform, with around 80% of the likes of low income groups, the self employed, gig economy workers and renters not having any protection cover in place at all.
Engagement triggers
Though one way of tackling this gap, Smith suggested, was exploring triggers for engagement.
“What’s common with all of those groups is that they are not typically having the opportunity to have the conversations that might trigger that sort of engagement,” Smith explained.
“So they are not taking out mortgages, having that mortgage conversation or they may not be in the workplace so don’t have that workplace conversation about this, so they are not interacting with some of these traditional routes where people take up these protection products.”
Consequently, Smith challenged delegates to think about alternative sets of nudges, particularly at those lifetime moments where people are open to having that conversation, which include having children or renting their first house, changing job, or moving to self employment.
Positive alignment
And Smith added that there appears to be industry consensus around the need to close the protection gap among different stakeholders.
“So we held an industry event about the protection gap and there really was a commonality of understanding in thinking about what’s driving it among the industry players,” Smith continued.
“We’ve also talked to the government and stakeholders. There’s a real interest in tackling the protection gap.”
Smith also pointed to Mayfield’s Keep Britain Working Review and work around improving financial inclusions as other important factors in the drive to close the protection gap.
“There is an alignment, a good alignment, that we want to build on and there is an opportunity through all of this whether it’s being driven by these government initiatives or tech,” he added.
“All of these things give us the opportunity to have a crack about the gap.”
