Industry reacts to FSCP consumer paper

Swiss Re technical manager, Ron Wheatcroft
Swiss Re technical manager, Ron Wheatcroft
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ABI makes statement on consumer panel findings while key protection figures welcome call for Universal Credit means-testing exemption

Financial Services Consumer Panel (FSCP) has published a paper entitled ‘Understanding the protection gap', exploring the attitudes of consumers to protection and why they are reluctant to buy it.

We reported on the findings of the research yesterday here.

In response, Roshani Hewa, head of protection & health at the Association of British Insurers (ABI) said: "Protection insurance provides vital support to those who find themselves unable to work due to illness or injury. Financial resilience, particularly when you have a family, is essential. This report rightly identifies a number of factors, including complexity and poor interaction with the benefit system which act as a barrier to greater uptake.

"The industry wants to do all it can to address the current protection gap and the ABI and its members are working with consumer groups, charities and regulators to increase understanding and create innovative tools to boost coverage."

Universal Credit

Johnny Timpson of Scottish Widows Protect, meanwhile, was encouraged that the paper acknowledged the issue of means-testing exemption of rent payments and household utilities in relation to state benefits.

"I support today's report from the FSCP. Many of the findings align with what is being asked of the DWP, the FCA and the industry by the Building Resilient Households Group and the ABI Protection Committee," he said. "This is that as part of the mortgage/re-mortgage and further advance process, it should be mandatory to have protection discussions."

"There should be a review and change to the Universal Credit means-testing rules and the introduction of means-testing disregards where protection claim benefits are used to fund rent, utility bills, broadband, council tax and child care commitments," he added. "This builds on the disregard recently secured where protection claim proceeds are used to pay down, pay off or service debt liabilities, including mortgage debt."

His statement came as Building Resilient Households Group readied their own response to the Resolution Foundation's think tank recommendations for Universal Credit claimant migration.

Swiss Re's technical manager Ron Wheatcroft concurred with Timpson. "We agree strongly with the panel recommendation that government examines the case for allowing a full disregard for all capital and income pay-outs in the assessment for Universal Credit and other means-tested benefits," he said. "It is encouraging that the report finds that the consumer research and industry views are very similar. This provides a solid base to build on." 

Positive market mood

According to Swiss Re's Term & Health Watch 2018 report, there is an upward trend in new sales and a more positive market mood generally. "While this is good news, the FCA's Financial Lives data show the scale of the challenge if we are to make society more resilient to financial shocks with 65% of adults having no protection insurance at all," said Wheatcroft.

"We should not forget the support that employers are providing to workforces with almost 12.5m people insured under employer-sponsored arrangements."

Gig economy

Timpson, meanwhile, suggested that better education and awareness around products is crucial to bridging the protection gap.

"Employees need to be made more aware of their workplace income replacement benefits, welfare entitlement and provision," added Timpson. "They need to be able to access information and tools to understand the state income replacement safety net."

He also reinforced the consumer panel's view that the protection industry must tailor better solutions to support the self-employed and those with unstable incomes.

"Consumers need to be made better aware about access to protection solutions, simplifying both products and the advice process, plus supporting adviser professional development," he said.

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