Recent research into consumer attitudes still shows an amount of self-deception, finds Kirsteen Grant.
Interestingly, more than half said they would need up to £1,000 a month and a third £1,001-£2,500 a month to cover their basic living costs, including mortgage rent and household bills.
With the average saving at £5,500 many would struggle to manage for more than five months without a regular income. The chart (top right) reflects consumers’ estimations of surviving without an income for a significant amount of time.
If their savings will not support them, then what will? The research looked at the role of the Welfare State as a means of support in consumers’ lives. Nearly half did not believe the Welfare State would provide them with adequate support if they were unemployed or off work due to long term sickness or disability.
Only 19% believed they would be looked after adequately, as people now don’t see the Welfare State as a means to provide for their financial security. One in ten see their employer as a buffer.
However, earlier research found that 66% did not know how long their employer would pay their full salary in times of long-term sickness absence (illness or injury). It is clear there is a level of uncertainty among consumers on how they would realistically cope with health and financial emergencies.
Is perceived affordability the reason consumers do not buy protection products? Earlier research by The Syndicate found that consumers had a ‘price ceiling’ and indicated they were rarely willing to pay more than £20 a month, regardless of the product type. It may be the case that financial transactions of any kind are subject to a price ceiling.
With household finances under pressure, it is not surprising price is a key element for both consumers that buy our products and those that feel they can’t afford to buy them. People focus on their everyday essentials, such as utility bills.
Consumers are willing to spend on average £13 a month on lottery tickets for little or no return. The same amount could be used to purchase a life insurance policy if they could see the benefits. The true value our products bring are not widely appreciated in comparison to other purchases.
Building trust is also a way to break down barriers to protection sales. To support this concept the industry has, in recent years, encouraged providers to reveal statistics of claims paid, and this may become mandatory across all types of insurance in due course.
One reason has been the perception that the public thought claims paid percentages were much lower than is actually the case. When asked ‘What percentage of death claims do you think insurers pay on average?’ nearly half thought up to 50% of claims were paid and one-tenth selected 91%-100%. Reassuringly only 3% believed absolutely none were paid.
Creating an environment where people are mindful of the actual claims experience, wider publication of the good the industry delivers and case studies of ‘people like me’ would help build a reputation of trust.