There are encouraging signs that attitudes to income protection (IP) have shifted, with many young people now more open to it than older generations.
The protection industry has historically struggled to engage younger consumers and in the past, it was widely acknowledged they were even more underinsured on the IP front than the population at large.
However, recent findings suggest things have changed here.
Research carried out for Shepherds Friendly last year found those working full-time and aged between 25-34 had the highest levels of IP cover at 20%.
In addition, those aged 18-24 matched the average figure of 14% – a positive development when this age group has typically lagged overall averages.
The FCA’s Pure Protection Market Study interim report also suggested younger people have become more invested in protection.
Its survey of 14,326 UK consumers revealed that while those aged 18-34 were roughly as likely as other working-age people to have cover, they were much more likely to have bought their policy in the last 12 months.
While this percentage includes all protection products as opposed to just IP, it seems reasonable to assume many of the policies purchased would have been IP given younger people are understandably less concerned about life insurance.
Awareness and understanding
All of these optimistic signs come despite younger age groups having less awareness of the product than older cohorts.
While our study of 2,000 people found that on average 70% of those working full-time had heard of IP, among 35-44-year-olds this fell to 57%, among 25-34-year-olds to 54% and among 18-24-year-olds to 46%.
There is clearly still work to be done in educating young people on the product.
This is especially true because even when they know of IP, recent feedback we’ve had from front-line advisers suggested they hold misconceptions around it.
Chief among these were that it was more expensive than it is, that it was quick to purchase and that it covers redundancy. Real-life scenario framing by advisers could certainly help clients see its true potential.
But they have to reach them first and this is not as simple as repeating the same outreach used for previous generations.
Young people today are different to their predecessors at the same age and they want different things, delivered in a different way.
For example, our research found that across all age groups, social media presence and online reviews or testimonials were the factors least likely to sway respondents towards speaking to a financial adviser about protection.
Both were rated important for just 9% of all respondents, but for workers aged 18-34 they scored higher, at 18% and 15%, respectively.
Similarly, when it came to the most desirable added policy benefits, while older people wanted features such as cancer screening and physical care, younger adults wanted flexibility and digital health bolt-ons such as 24/7 virtual GP services.
Demand for IFAs
Interestingly, given the typical age of most IFA clients is above 45, those aged 18-24 were the most open to speaking with a financial adviser about IP.
It seems then that if advisers are willing to engage with those often referred to as digital natives in the manner they prefer and present the options most likely to appeal to them, they’ve a good chance of convincing them of the merits of IP.
After all, they are just as likely – if not more – to need it as older generations.
However, while in the past, the impetus may have been major milestones such as getting married, having children or a first mortgage, many people are reaching these milestones later in life – if at all.
Today, a young person’s need to protect their income is perhaps more likely to be so they can pay the rent, car loan and bills, or simply to protect their ability to work in their chosen career.
It may even be driven by a desire to avoid becoming a ‘boomerang kid’ who moves back in with their parents.
While there are certainly differences between what they need and want from IP, a number of things point to the idea that contrary to previous assumptions, younger people might be more open to IP than older generations.
As the population ages, the industry has a unique opportunity to increase the overall percentage of people in the UK who have income protection and therefore improve the nation’s overall financial resilience.