Many consumers may have a false sense of security about their level of life and health insurance cover, as the number of policies sold fails to match individuals’ perceived levels of cover.
The findings are published in a new report by research body The Syndicate, a joint project between Hannover Life Re and protection industry members of the Protection Review.
Peter Le Beau, co-chairman of the Protection Review, commented: ‘The research suggests several anomalies, one of which is that many people appear to have more protection cover than the real statistics prove. This is a regular finding in studies on the protection market and suggests there is a growing element of imaginary cover in the minds of UK adults.’
Reasons for the gulf between perception and reality include:
- Over-estimation by consumers of employer and state benefit provision, for example sick pay.
- A lack of understanding by consumers of the actual protection products they have bought.
- Providers’ failure to engage with customers over the longer term, leading to a lack of engagement.
Protection insurance a low priority
The 1,000 people interviewed were also asked about how they would spend the money if their monthly income increased by £100. While many said they would save more or pay off debt, taking out protection insurance languished behind holidays, hobbies and spending on home improvements.
|Which of the following would you do if your income increased by £100 per month?|
|Put towards a holiday||18%||18%|
|Pay off debts||19%||16%|
|Spend on items for house||10%||14%|
|Increase or pay off mortgage||6%||7%|
|Hobbies / recreation||7%||3%|
|Financial planning (incl. life & health protection)||5%||4%|
|Spend on clothes||n/a||2%|
Importance of reviewing your protection insurance needs
Which? protection expert Martyn Saville commented: ‘This new research paints a rather worrying picture. While many people would put any extra money aside into savings, those surveyed gave a low priority to protecting their income if they were unable to work. Vital protection products like income protection remain unknown to far too many consumers, while others believe they are covered by existing policies, when in fact they are not.
‘It’s important to consider all of your protection needs together. While a good life insurance policy, for example, might pay off your mortgage and provide for your family if you died, it won’t pay out if you fall ill, have an accident or lose your job. Similarly, you may have private health insurance, but this will only pay for treatment, it won’t replace your income if you’re unable to work. Statutory sick pay is just £81.60 a week and is time limited, so it’s important to consider how you’d get by if the worst happened.
‘Taking professional advice is a good way to make sure you get suitable cover to match your protection needs and your budget.’