Closing the Protection Gap Starts with Informed Clients

Millions of people have no protection insurance coverage and could be left vulnerable in the event of a death in the family, serious illness or loss of income. That’s according to the FCA, which has announced it is partnering across sectors to tackle the issue.

We’ve talked as an industry about the protection gap for years. Now the FCA has said that 58% of UK adults have no life, critical illness cover or income protection – and this really brings home the scale of the problem. It has also revealed that 59% of those without protection have never even considered it.

That second number is every bit as important as the first. There’s a big difference between somebody understanding their financial vulnerability – considering protection and deciding it isn’t for them – and somebody never properly considering it in the first place. You can’t reject something you’ve never properly considered.

The FCA hasn’t concluded the protection market is fundamentally broken.

It suggests that the lack of protection is primarily driven by a combination of demand side (consumer) factors, including low awareness, limited product understanding and behavioural biases, and supply side (firm) factors, including friction in consumer journeys, underwriting complexity and limited availability of products suitable for consumers with more complex needs.

It will now join forces with partners from industry, government and consumer groups to tackle the issue.

Alongside that action, these figures should also give mortgage advisers and networks pause for thought.

I’ve always felt we make a mistake when we treat protection as an add-on to the mortgage. We can spend hours discussing rates, affordability, term, lender choice and saving somebody £30 or £40 a month, but ultimately that mortgage is probably dependent on one or two incomes continuing to arrive in the household every month.

If we arrange the debt but don’t properly discuss what happens if the income paying for it disappears through illness, injury or death, I’m not sure we’ve completely finished the job.

That doesn’t mean everybody should buy every protection product going. Sometimes good advice will result in somebody making an informed decision not to proceed. The important word there is “informed”. It means our client has understood the risk and made a choice.

If we genuinely want more people to consider protection, it comes down to some fairly basic things: process, capacity, motivation, training and coaching.

Is there a simple process that makes protection part of the advice journey rather than an afterthought? Has the adviser actually got the capacity to do it properly? Do they understand why it matters – and are they motivated to have the conversation? Have we trained them properly? Are we then coaching them, looking at what works, helping when it doesn’t and going again?

None of that is revolutionary. The difficult bit is doing it consistently and at scale.

And I think networks need to look at themselves here too.

There’s an important balance to strike. We work with self-employed advisers and business owners who have built their own firms, know their clients and quite rightly want the freedom to run their businesses. We have to respect that independence. A network shouldn’t be trying to run somebody else’s business for them.

But with that freedom comes a shared responsibility. As a network, we have a responsibility to make sure the regulator’s expectations are understood and ultimately delivered, and that clients are receiving the right outcomes. The answer isn’t to dictate; it’s to create an environment where doing the right thing becomes the natural and easiest thing to do.

That’s why I think it’s too simplistic for a network to tell its firms that protection is important, point at the numbers and then ask why they aren’t writing more of it. The better question is: what are we doing to bring protection to life and support our firms in delivering the right outcomes for their clients?

Importantly, different businesses will deliver that in different ways. The network can set the expectation and provide the framework, support and oversight without prescribing every step of how an individual firm gets there.

Passion matters too. If we present protection as a compliance exercise or something that needs ticking off before the mortgage completes, we shouldn’t be surprised if clients treat it like one. When an adviser genuinely believes in what protection can do for a family, that comes across.

For this reason, more policies shouldn’t be the objective. More people understanding their financial vulnerability and making informed decisions should be. If we get that right, increased take-up should follow naturally with, ultimately, fewer families discovering how financially exposed they were when something has already gone wrong.