Government must focus on addressing the protection gap

August 8, 2014 | 8years | Insurance News

Keith Richards: Government must focus on addressing the protection gap

A recent report has laid bare the scale of under-protection in the UK, revealing that half the country’s homeowners have no life insurance, while only one in five and one in 10 respectively have a critical illness or life insurance policy in force.

YouGov research, conducted for Scottish Widows, surveyed more than 5,000 adults and echoed a separate YouGov/Friends Life survey earlier this year, which additionally revealed that only 4 per cent of 2,031 people surveyed had income protection.

On the housing front, an alarming number of mortgaged homes are at risk of repossession because their owners lack protection insurance, with only 43 per cent fully covered for the debt.

We are a chronically under-insured nation, with the third-largest mortality protection gap in Europe – reckoned to be in excess of £2.4trn and growing.

It is estimated that 16 million people in the UK could benefit from some form of IP. Instead, only around three million policies are in force.

Millions of families are exposed, believing they can rely wholly on the welfare state in the event of financial hardship.

You may be familiar with ‘Prism’, the hierarchy of needs acronym, which places protection needs ahead of retirement, investment, savings and mortgages – priorities that need to be heeded urgently.

Government, regulators, protection providers and the advice profession have a collective responsibility to address the protection gap. It is a responsibility that needs the backing and focus of Government as rigorously as retirement guidance.

Keith Richards is chief executive of the Personal Finance Society

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