Even if purse strings are tight, Paul Walsh says insurance providers need to take control of protection to regain consumer confidence.
Since the global economic downturn in 2008, many insurers have been fighting the tide of deflated consumer confidence alongside all financial institutions. The following year dealt insurance providers more grief with the PPI scandal, a major blow to both their finances - with billions of pounds anticipated to be paid out to consumers by way of remediation - and their reputational damage with consumers and regulators.
Together, these factors have led to significantly reduced consumer uptake in income protection, leaving many consumers exposed to life's uncertainties.
However, this market shift also represents a golden opportunity for a small cohort of insurers led by the mutual sector to transform protection in the UK, to rebuild consumer confidence and gain vital market share.
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The past three years have not been kind to the purse strings of the vast majority of UK consumers. Escalating unemployment rates, fear of redundancy, stagnating salaries and rising food, petrol and utility costs have led to consumers cutting back on expenditure as they simply have less money to spend.
With the UK now possibly in the grips of a double dip recession, there appears to be no immediate end in sight to this current trend, which is tearing several parts of the insurance sector apart.
As consumers reduce spending, they are continuing to purchase obligatory insurance such as car and home protection, but are more likely to cancel or opt out of policies deemed unnecessary to their day-to-day lives, such as income protection, bill protection or cover against accident and sickness. Additionally, online banking is fuelling this decline as cancellation is quick and easy to do, but lacks face-to-face expert advice.
The result? Consumers put themselves more at risk of being unable to meet their household debts in the event of being out of work. There is a growing risk that many are being stretched financially and, at worse, at risk of losing assets or their family home.
In particular, younger members of society are opting to leave themselves uninsured and financially exposed. According to Cuna Mutual's latest consumer trends, 2011 witnessed an increase in the average age of consumers buying income protection-type policies compared to the previous year.
Many commentators are attributing this to customers in their 20s or early 30s, probably feeling the economic squeeze more than their older counterparts.
