An extra £2trn is needed to provide adequate protection
At least £2trn is needed to plug the life protection gap, according to Swiss Re's latest insurance report - Whose risk is it anyway? It claims that the amount of life assurance cover held by UK consumers needs to double if they are to adequately protect themselves.
Swiss Re's estimate compared individuals' needs for life cover against the number of policies, savings and assets held in the UK and it reflects the genuine requirements of individuals and families who are either failing to provide or who are under-providing against the most basic risk.
The report does however acknowledge that life cover is not essential for the entire population and that each individual's needs vary widely. It cites the need to pay off outstanding mortgage debts or any other debt; providing income for a partner and raising children in the event of a partner's death as key reasons for taking out life cover.
Extending the reach of financial products to those considered as financially excluded - 6.8 million households whose annual income falls between £9,500 and £24,999 - is also a key feature in the report. It states that while income is the main distinguishing factor to financial exclusion, their state of health and how well educated they are can also influence consumers' relationships with the insurance industry.
The study also highlighted several key barriers to the purchase of insurance. The number one obstacle is the affordability of financial protection and many consumers struggle to balance the cost of insurance against other household priorities.
Access to financial advice was also listed as a barrier to purchase. Many consumers do not know where to go to get help with buying suitable products, the report said.
Ron Wheatcroft, technical manager at Swiss Re Life & Health and co-author of the report, called on the industry to re-engage consumers if it wishes to win back confidence and help to narrow the protection gap.
"The plain fact of the matter is that if the financial services industry does not succeed in radically improving this situation, it has immense consequences for the future economic development of this country," he said.
