Cicero Policy Briefer

Issue 18, November 2007

Distrust or apathy: why aren’t consumers buying protection?

By Ron Wheatcroft, Technical Manager, Life and Health, Swiss Re

For many years, the life and health sector has bemoaned the lack of trust that consumers have in us and our products. Against this background, it has become all too easy to regard regaining consumer trust as the biggest issue to address if we are to begin to reduce the protection gaps.

Recently, Swiss Re asked a representative sample of the adult working population why they had not bought life and health protection. The findings go a long way to exploding the myth that trust is the biggest barrier to customer engagement.

Although 7 per cent of consumers cited lack of trust as the main reason for not purchasing life cover, more than 31 per cent claimed not to need it, and 29 per cent said they couldn’t afford it (or that it was too expensive). Meanwhile, 23 per cent simply hadn’t thought about it.

Similarly, 28 per cent of people claimed not to need income protection, 25 per cent considered it too expensive and 24 per cent had either not thought about it or not got round to it. Only 5 per cent cited lack of trust as a reason for not purchasing.

The research paints a picture of consumers largely disengaged from and apathetic to long-term insurance. Swiss Re estimates that half the adult population has a life assurance protection shortfall which, on average, amounts to £100,000. We estimate that barely one-quarter of the need for long-term income protection cover is in place.

We cannot be complacent about trust but this must not be a convenient excuse for not taking united and concerted action to improve understanding of our products and, even more importantly, how they fit into consumers’ lifestyles and aspirations.

The Retail Distribution Review gives an opportunity to begin tackling lack of consumer engagement and basic awareness. Life cover and protecting income against the consequences of long-term disability must be at the core of people’s understanding of financial products. The Thoresen Review must take protection on board, alongside the very obvious need to educate people better about the perils of debt. Long-term protection must be part of Primary Advice models which may emerge from the Review.

It would be easy, though, to look to regulatory initiatives to increase awareness of what we do. This alone is not the answer. Swiss Re believes that now is the time for the industry to unite behind a campaign which puts the value proposition of long-term insurance right in front of consumers.

Ron Wheatcroft is the Technical Manager of Life and Health of Swiss Re and can be contacted here.

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