Research: Swiss Re's latest figures point at disparity within the market
The life assurance and protection gap among UK consumers has risen from £2,000bn to £2,200bn in terms of sums assured despite record sales of life cover in 2003, according to a recent study by Swiss Re Life & Health.
The insurance report, A Gap in Perception, warns that despite increased confidence among consumers towards buying insurance products, in the short-term, there are no signs that this trend towards a widening gap will be reversed.
A number of factors including inflation and an increase in the working population have contributed to the widening gap. Swiss Re has warned it may further increase once new rules covering protection advice fall under the Financial Services Authority's (FSA) regulatory framework in January 2005.
It also expects FSA regulation to act as a catalyst for further market consolidation among intermediaries, which will have an impact on the structure of the UK financial services market.
Roger Edwards, products director at Bright Grey, said the protection gap should help to push advisers towards becoming regulated as they can help to address the issue.
"Despite record term assurance sales, we are only scratching the surface when it comes to plugging the protection gap. While the report suggests the possibility of regulation reducing the number of advisers working in the market, it should actually encourage them to become regulated.
"This is all about raising awareness and ensuring consumers are well covered. It is advisers who are well placed to do this," he said.
The study also anticipates regulation to have a harsh impact on those consumers with low to middle incomes as it will be less economical for financial advisers to deal with them.
While the report suggests that the key to resolving the disparity between in-force cover and consumers' protection needs lies in the delivery of financial advice, many consumers are reluctant to pay for it and advisers are unwilling to handle business at the rate most consumers appear willing to pay.
Mark Johnson, head of marketing at Swiss Re Life & Health, said: "The challenge facing Government, regulators and the industry will be to deliver a proposition, which balances consumer interests with costs."
