- Majority (55%) of UK consumers say COVID-19 has made them reassess how they protect their future financial wellbeing
- However, only 15% said they would list life or health insurance as a top three priority to protect their financial wellbeing, and almost a half (46%) think life providers will find loopholes to avoid paying out claims, despite evidence to the contrary
- 60% of respondents didn’t use a financial advisor when they bought protection insurance; of those, 35% didn’t see the value in paying for advice and 21% thought it would be too expensive
COVID-19 has prompted the British public to reassess their future financial wellbeing, according to a new report by EY¹. The findings show that many people are not prioritising protection as a way of securing their financial future, with trust being a key issue highlighted.
The research, based on interviews with a nationally representative sample of 1,000 UK consumers, looks into current views on personal financial protection, and finds that in the wake of the pandemic, 55% of respondents are revaluating how they protect their future financial wellbeing. Only 15% claim they would list life or health insurance as a top three priority to protect their financial wellbeing. This contrasts with over three-quarters (77%) prioritising savings.
Looking specifically at life and health insurance, a quarter (25%) of respondents said that COVID-19 had affected their attitude towards this type of protection, with 58% of this group feeling more positive towards such cover. However, only 11% surveyed would class reviewing their life and health insurance as part of reviewing their overall financial wellness.
Industry trust, along with product cost and complexity are key concerns
According to the research, 34% of respondents find life insurance confusing. As for trust, almost a quarter (22%) believe providers aren’t ‘honest and transparent’. In addition, almost half (46%) of respondents think life providers will find loopholes to avoid paying out claims, despite the fact that more than 95% of all claims are paid by the industry.
The report also reveals the reasons why over half of those surveyed (54%) do not have any financial protection policies in place. Of the 54%, 31% claim they can’t afford protection; 30% believe it is ‘a waste of money’; 23% think other priorities like meeting day to day expenses are more important; and 16% said they don’t trust providers to act in their best interests or that they’ll pay if a claim were made.
Clive Allison, UK Insurance Protection Leader at EY, comments: “COVID-19 has shone a spotlight on longstanding challenges around consumer trust and engagement with core insurance products, even though they’re vitally important for many people. The perception many consumers have around claims payouts versus actual claims data shows there is a concerning and inaccurate mismatch which urgently needs addressing.
"The research also shows many consumers don’t think of life and health insurance as a priority for their financial wellbeing and prefer to rely on savings instead, despite the fact a savings pot, in many cases, wouldn’t come close to covering all the necessary expenses in the event of critical illness or death.
"It is crucial that providers look to tackle these challenges by finding ways of strengthening relationships with existing customers. And, in order to attract new customers who could benefit from such cover, insurers need to better educate people on how life and health products can contribute to financial wellbeing – not just in response to the pandemic, but across a lifetime.”
Divergence between gender and generation on taking out a policy
The research findings show there are some key divergences between gender and generation. The data shows that 51% of respondents under the age of 54 do not currently have a protection policy in place, compared to 60% of over 55s, and that 48% of men surveyed don’t have a policy, compared to 60% of women.
While the pandemic has had a big impact on how many people view their financial futures, it is the younger generation that has been prompted to reassess their financial wellbeing in larger numbers, with 73% of under 35s claiming to do so, compared to 59% of those in the 35-54 age group and 38% off those over 55. In addition, a higher proportion of women (62% compared to 48% of men) have reviewed their financial wellbeing due to the pandemic.
When looking specifically at life and health insurance, a higher proportion of younger people claimed it was confusing to them (50%), compared to 39% of 35-54-year olds and 16% of over 55s. Comparing this metric for men and women; a higher proportion of women (42%) felt life and health insurance is confusing, compared to 25% of men.
Advisors also face challenges demonstrating the value of their services
In addition to the providers, the report also reveals there is more that financial advisors could be doing to demonstrate trust and value for money. Of those who bought a protection policy, 40% used the services of an advisor. Of the 60% that didn’t, 54% felt their situation wasn’t complicated and they could do it themselves; 35% didn’t see the value in paying for advice; 21% thought it too expensive and 11% were worried about trusting someone else with their money.
For those that did choose to use an advisor, the top three reasons cited by respondents were; they wanted someone to show them the options available (40%); they felt more secure making difficult financial decisions using a financial advisor (39%); and they wanted to minimise the time and effort they needed to put in (32%).
Clive Allison concludes: “It is crucial that insurers and financial advisors alike demonstrate their relevance and value to consumers as the financial fallout of the pandemic on households takes its toll. Protection policies for many are invaluable - providing a safety net for people at a time when they need it most – and this needs to be effectively communicated.
“Technology will undoubtedly have the greatest impact in helping firms communicate to the right people in the right way. Becoming truly tech-led and analytics-enabled will also mean insurers can better meet consumers’ changing needs.
“In terms of practical steps forward, the industry needs to ensure it is doing all it can to promote its impressive claims pay-out rate to help instil trust. When looking at attracting higher uptake, it is key to remember that insurance products benefit from simplicity, and of course, competitive pricing. Flexible propositions where consumers can modify features, personalise services and tweak coverages via online channels without the need for additional underwriting, would be another option insurers could look to implement as consumers become more digital. And finally they could consider new holistic service-based models offering tailored advice to customers on which products they need. This could help to shift consumer perception from insurance merely being a product for a set period of time, to it being a service for life.”
For further information, please contact Vicky Luttig, EY media relations, 07393 758730
Notes to Editors
¹ EY Seren, EY’s specialist digital consultancy, conducted an online survey of 1,000 UK consumers, a nationally representative sample, in July 2020 to gather understanding on whether COVID-19 has affected or changed consumer perceptions of protection. Prior to launching the online survey, EY Seren conducted 10 in-depth interviews with individual consumers to refine the survey questions and themes.