Mark Cracknell explores how advisers can use the topic of crowdfunding as part of protection conversations with clients
The popularity of crowdfunding can make it seem like the solution to pay for crisis events in life.
Stories regularly appear in the media or on our social media feeds, highlighting the generosity of others when it comes to helping those who encounter illness or the loss of a loved one.
This can be an opportunity for advisers to discuss the value of protection with clients.
Crowdfunding past and present
In recent years there's been an explosion in crowdfunding to meet personal medical and funeral costs. The average cost of a funeral in the UK is £3,757 according to figures from Money Advice Service and without savings or insurance in place, people are looking to alternatives to pay for the funeral of loved ones.
Meanwhile, the cost of cancer treatment means more people are turning to crowdfunding. In 2016, 2,348 appeals were started on JustGiving to raise money for cancer-related treatment - the latest figures from JustGiving have shown.
This was a seven-fold increase compared to the previous year. In 2016, around 404 people raised a total of £1,393,490 in donations to travel to the United States for care.
While it's encouraging to know that loved ones, acquaintances and even strangers are willing to help, it's important to discuss with clients that depending on the kindness of others alone can be risky.
What plans do they have in place, instead, and have they considered protection insurance?
There is more certainty with protection, regarding what customers will get in terms of the payment from a successful claim, than with the unknowable outcome of crowdfunding.
A modern-day invention?
Crowdfunding is a new phrase for a familiar concept. The social media posts and online donation pages are the collection tins that once passed around communities, only today the potential donor pool can be much larger.
With most fundraising taking place online, crowdfunding feels more visible than ever. However, it's often only the success stories that make it into newspapers or onto our social feeds.
For every crowdfunder that successfully raises money to pay for a loved one's funeral or medical care, figures from JustGiving show that there are nine campaigns that don't meet their target.
Advisers can help their clients to appreciate this reality and use claims statistics or examples from real life claims stories to discuss how protection can fill this gap.
For example, figures from Aviva's most recent claims report show that we paid £957m to Aviva customers and their families during 2018 for life, income protection and critical illness claims. More than 26,000 customers benefitted from claims payments during that period.
Peace of mind
Meanwhile, protection policies have evolved to be much more than a lump sum pay-out. Many offer additional services to support families which would be far trickier and more expensive to access purely through donated funds.
Crowdfunding pages for medical treatments often result from individuals doing their own research to pick a potential clinic or treatment they think may be suitable. However, through added-value services available on protection policies, clients would receive clinical recommendations regarding approved treatments that would be tailored to their needs.
One example of how insurers can help is that many provide access to a second medical opinion, available both to the policyholder and their loved ones. While it might not change the diagnosis, it can identify the most appropriate proposed treatment or clinic options for your clients.
Other services can enable individuals and their families to have access to treatment abroad or meet the high cost of treatment in their chosen country or treatment centre.
Reading and sharing stories of donations provides a feel-good factor for society, but importantly this is a talking point for advisers to help clients seriously consider how they would respond financially should the unexpected happen.
For a monthly payment, a protection policy can offer the support and security that crowdfunding cannot guarantee.
Mark Cracknell is head of protection distribution at Aviva
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