The Association of Mortgage Intermediaries (AMI) recently partnered with Legal & General and Royal London to undertake a major consumer research project on consumer attitudes and their recollections of interactions in the protection market. The research asked 5,000 consumers and 500 mortgage brokers about their knowledge and understanding, principally on life, critical illness and income protection cover. This was one of the largest surveys undertaken in recent memory with the number of respondents confirmed by our research company as more than statistically valid.
Whilst virtually all mortgage brokers indicated that they discuss the issue of protection during the mortgage advice process, only 36% of consumers could recall the discussion. The lack of a memorable conversation about what should be an essential part of any advised sale must be a concern for the sector. The reasons for this are varied, but perhaps in too many cases the adviser sees it as an add on to the mortgage advice rather than part of a combined piece of advice. Feedback from supervisors in firms indicates that advisers often raise the issue as, “I need to talk to you about” rather than leading on it as a more positive, inclusive package of advice.
We were surprised by some of the feedback which indicated that whilst 65% of consumers feel it is important to hold life insurance cover, from the sample only 33% of those surveyed have it. Similarly, 59% of consumers feel it is important to hold critical illness cover whilst only 10% have that cover. When turning to look at the more controversial product an amazing 58% of consumers confirmed that they felt it important to hold income protection, whilst 7% have that type of cover. This gap between consumer demand and holding an active policy can partially be explained by an aversion to the price of the contract but this means that as an industry we are not explaining the value and benefits sufficiently.
The research also indicated that 46% of consumers would prefer to buy protection using a website application. Indeed, whilst the mortgage process has become more “tech” enabled in the last few years, we need to spread that momentum to protection. This should not be by avoiding discussion and advice but, as in mortgages, using technology to smooth the journey and do the “heavy lifting”. Consumers may prefer to complete the health screening questions and supplementary enquiries via a portal and delivering this could assist in increasing product take-up.
The research also surfaced a fundamental “trust” issue. Whilst the industry has worked hard over the last twenty years to refine, improve and publish claim statistics, 57% of consumers do not believe the published numbers. It appears that the difference between the anecdotal evidence seen in newspaper articles and individuals own claim experience across the whole insurance arena, clouds their perception of the market. The second element to this is that 52% of those surveyed believe that the reason the adviser was promoting protection was only to increase their commission. Unless advisers can find a way to better present the claims data and change their narrative around the reasons for raising protection, with many consumers it will be an uphill battle. Gaining their trust before even approaching the product is needed to get positive engagement.
On a positive note, 64% of consumers want protection insurances to be discussed before or at the same time as arranging the mortgage. Whilst many advisers feel that by the time they have completed the work to advise on the mortgage the customer has limited capacity to deal with any more, the research indicates that many consumers want to do this at the same time as a comprehensive advice package. This is a real positive.
Finally, consumers see buying a house or moving home as two of the three key drivers to buying protection, with having a child splitting the two as a motivator. This means that mortgage advisers are not just in the prime place to have these memorable conversations, they also have the knowledge of all the financial circumstances to base their advice on. The research also showed that less than a third of UK adults can correctly identify what income insurance is, which means that there is the opportunity to educate the customer on the real features and benefits of the types of cover available. One of the barriers that consumers might be facing into is that home insurance is considered by them the most important insurance policy. So those brokers who ignore discussing this element might be seen to be cherry picking a higher earning solution to selling to need and priority.
So what will AMI be doing about these findings? We have recently created a Protection Specialists Group made up of the most “passionate about protection” people we could find amongst our member firms. This group will be meeting at least six times next year to help us shape ideas, policies and campaigns on how to change and promote protection amongst advisers and consumers. The challenge is to engage Government, regulators, insurers and consumers to resolve some of these issues. We will also be working with member firms to use the analysis to develop their training to better focus on the consumer in their approach to protection. For many it will be to develop their skills, but for others it will be referring to a protection specialist who will work in partnership to provide the best overall customer solution.
Chief Executive, AMI