Life - Articles - Clients don’t believe in income protection


Clients don’t believe in income protection, but advisers too need confidence in the product to revive the sector

 Research by independent financial research company Defaqto has found that 60% of advisers believe income protection is difficult to sell because clients don’t think they need it. Additionally, 39% of advisers said that clients couldn’t afford it and 38% said that it is too expensive1.
 
 Defaqto’s latest Review of Income Protection Products, published today, suggests that people cannot envisage themselves being sick for any length of time; and that, if they are, there is a belief that the state will provide – while others think that they would have enough money to tide themselves over.
 
 The take up of income protection insurance remains low despite the fact that it is one of the most important protection products on the market. While advisers generally accept that income protection is important to have, they say that many people find it unaffordable and some advisers themselves have concerns about whether policies will pay out.
 
 The report says that long term income protection insurance is an advised sale, but in the future there may be fewer advisers to distribute income protection if some leave the market in the wake of the Retail Distribution Review (RDR).
 
 As a result, it is important for providers to place greater emphasis on helping and supporting advisers to encourage them to make more income protection recommendations and become more ardent advocates for the product. The report highlights the main issues which are of concern to IFAs and the product developments which are needed to address these for the IFA sector. For those insurers interested in servicing the mass market, products will need to be easier to buy, cover the key needs and be very clear about what is and what is not covered.
 
 Ben Heffer, Defaqto’s Insight Analyst for Life and Protection Insurance, said:
 
 “Within protection advice, income protection should be the first consideration in most scenarios. The emphasis on marketing life and critical illness cover can often result in income protection being overlooked, when in reality it should be the foundation of the financial planning process.”
 
 Defaqto’s latest report on income protection, analyses advisers’ opinions on the product, the problems facing the sector, and also outlines potential product development opportunities for providers in this area.
 Providers can download the report at: http://www.defaqto.com/provider/publications/
 Being successful is all about ensuring products take a distinct place in the market, and having access to comprehensive market and competitor intelligence is critical to achieving this. Defaqto Matrix is a web-based product research application that provides firms with independent, whole of market data on the income protection sector. Defaqto Matrix helps providers:
 
 • Identify where their products sit in relation to competitors
 • What features their products need to have in order to stand out
 • How to position them for maximum impact
 
 Firms can access further information at: www.defaqto.com/provider/matrix.
 In addition, Defaqto Star Ratings give each income protection policy on the market a rating from 1 to 5 depending on how comprehensive they are. Star Ratings are an independent verification of the quality of a provider’s product which reinforces the position and strengthens the profile of the product. Star Ratings also help providers differentiate and promote their products on the features they offer rather than price alone. Firms can access Star Ratings for income protection policies at: www.defaqto.com/star-ratings/income-protection.
 Defaqto also provides bespoke consultancy services which includes product, competitor and market analysis.
  

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