The mortgage market is not the only reason for a decline in protection sales.
This is according to advisers Health & Protection spoke to following the release of Gen Re data last week that showed some 50,000 fewer protection policies were sold in Q1 2024 than in the corresponding quarter of 2023.
While the mortgage market continues to feel the aftershocks of the Truss mini budget, – which at least focused some consumers’ minds on the need for income protection – the mortgage market does not appear to be the only reason protection sales are struggling.
Old adage still rings true
Alan Lakey, director at Highclere Financial Services, said: “This may signal an ongoing theme that less advisers are focusing on protection, while more consumers are online and aggregator oriented.
“Time will tell.
“But with critical illness sales 50% or less of their year 2000 figures, the old adage that protection is primarily sold and not bought remains true to this day.”
Learning to live with it
Joanna Streames, owner of Velvet Mortgage and Insure Services, explained that last year with a significant number of mortgage deals coming to an end, and since almost all of those increased, customers have needed to adjust to the new, higher outgoings.
“Albeit, fuel prices have improved, food prices and general living costs remain high all of which compound the pain of significant mortgage hikes,” Streames said.
Streames predicted that this trend will continue as tighter budgets take their toll and more mortgage deals expire.
“As a result, a lot of consumers will have been learning to live with it or are waiting to learn to live with it, essentially prioritising immediate financial needs and parking their protection needs as non-urgent,” Streames continued.
“Insurance often falls into the non-essential category of finances. The work of the industry and advisers is to change this culture and put extra steps in place to reach more people and extra touch points to their existing clients.”
Combination of factors
Alan Knowles, managing director of Cura Financial Services, maintained it is hard to pinpoint an exact reason for the decline, adding it is more likely a combination of factors.
“It could be a knock on from the ups and downs of the mortgage market, that people are still feeling the pinch with the cost of living and that brokers are not getting protection in front of enough customers,” Knowles said.
“Poor insurer service levels and a string of bad claims stories hitting the press in Q1 certainly won’t be helping customer interest/trust either.”
Bucking the trend
Though Andy Walton, proposition director – Mortgages, Mortgage Advice Bureau, told Health & Protection MAB is up by 15% on banked protection year-on-year when comparing Q1 2023 with Q1 2024.
“On income protection that’s mentioned in the Protection Plus Report, MAB is up 22% on last year,” Walton said.
“We’re the UK’s number one distributor of income protection (IP), having sold over 10,000 IP policies in Q1 2024.
“It’s alarming to see that the wider protection market has declined by 7.5% in Q1 2024 versus Q1 2023. This doesn’t have to be the standard.
“Mortgage Advice Bureau is bucking this trend, with our banked protection sales up 15% compared to the same period.
“Income Protection was highlighted as growing, but slowing down with a market increase of 8%. Mortgage Advice Bureau saw a 22% increase in IP sales compared to the same periods.”
Process and positioning
Walton added process and positioning have proven key to MAB bucking the trend.
“Process is around having the right technology that engages customers from the outset in relation to protection, and assists advisers on the protection journey,” Walton explained.
“Positioning is about having the right conversation, every single time, with a customer around protection.
“Too often, the protection conversation is not of the highest quality, and sometimes does not happen at all.
“Consistency of approach produces constant results.
“At Mortgage Advice Bureau, we find that customers do want to engage, and are interested in protection, they simply don’t know how to start.
“Our stance is that we need to help educate customers about the benefits of protection, helping them to understand the risks they have in their lives.
“At the end of the day, that’s what Consumer Duty is all about, and what good customer service truly means.”