While overall income protection (IP) applications and volumes have increased 7% and 56%, respectively, year-on-year, the market still faces a protection gap that remains “stubbornly large”.
This is according to the third annual Profile of an IP Customer report, produced by the Income Protection Task Force (IPTF) in collaboration with Iress.
The report, which draws on nearly 55,000 IP applications submitted via The Exchange and three years of cumulative market insight, shows who is buying IP in the UK, how, and why, and where the biggest opportunities to grow the market lie.
Key findings
The latest report reveals multi-benefit (menu) plans now account for 49% of all IP benefit applications, with 88% of multi-benefit buyers aged 45 or under.
The most common age range for buying a multi-benefit plan is 26 to 35.
Despite market growth, 85% of IP needs in the UK remain unmet, and 76% of people have no income protection in place at all.
The average monthly benefit amounts continued to rise but still fall more than £1,200 short of the average monthly expenditure for mortgage-holding households.
Four in 10 (41%) UK adults feel financially protected, but only 19% actually have adequate cover, creating a 22% “perception gap” that the report describes as a call to action for the industry.
And the research found women were 25% more likely to engage with IP when presented as part of a holistic, multi-benefit solution, yet women’s uptake of standalone IP remains disproportionately low.
Milestone Convergence
For multi-benefit plans, 88% of buyers are now aged 45 or under, with the peak buying age concentrated between 26 and 35. Consumers who are using integrated plans as an affordable entry point to financial protection before they reach peak financial pressure in their late 30s and 40s. The report describes this as a ‘Milestone Convergence’ a generation engaging with protection earlier than any before it.
More than 70% of individual policies now run into retirement, reflecting the parallel trend of mortgages extending deeper into later life, with the three most common end-of-mortgage ages now standing at 68, 69 and 74.
Under-protected, underinformed and unsure
Vicky Churcher, executive director at the IPTF, (pictured) said: “While more people are engaging with protection, too many still remain under-protected, underinformed, or unsure whether the cover they have is enough. For the IPTF, that makes this report more than a snapshot of market activity.
“It is a practical tool for advisers, providers and the wider industry to better understand today’s customer and help turn awareness into meaningful financial resilience.”
Jane Irwin, protection product lead at Iress, added: “More than 85% of income protection needs in the UK remain unmet, highlighting the scale of the protection gap and the significant opportunity for the industry to better support customers.
“Through the data and insights underpinning this third edition, we hope to help the market better understand evolving consumer needs and continue driving meaningful change.
“We have already seen tangible improvements in adviser behaviour and product design as a direct result of our previous reports, and we are proud to continue supporting the work of the IPTF by delivering the market intelligence that helps shape real progress in the protection industry.”
