Prompts to find simpler definitions for protection products and services
According to Swiss Re’s latest edition of its insurance report, the UK consumers are confused about what insurance cover they think they have compared with what they are actually covered for. Swiss Re is prompting UK life insurers to keep product definitions simple and to improve the transparency of what they offer.
The report said that the industry should seize the opportunity to empower consumers with the information they need to move from better awareness towards making informed decisions and improving their financial protection. The report also said the industry needs to help consumers to take greater responsibility for future provision of protection needs as the pressures on the safety net provided by government intensify.
The report titled ‘The cost of doing nothing’ has said that 44% of consumers felt reasonably well positioned financially, if they were to suffer long-term illness, disability or die. While people still perceive life insurance as the main way to protect themselves financially, just 36% believed they can actually rely in practice on holding adequate insurance. However, an increasing number of people thought they were self-reliant.
The report also explained that this unrealistic optimism made people oblivious to the fact that whatever insurance they hold is unlikely to be enough to support their future. 52% of people thought they had life assurance, 28% thought they had critical illness (CI) and 36% income protection (IP), either through a policy they own or one arranged by their employer. The findings stem from research conducted by Swiss Re among more than 1,000 consumers.
Maxine Smith, co-author of the report, said: “Consumers seem to have a relatively good understanding of life insurance, while many say CI remains a confusing product, and only a small minority understands the purpose of IP. The industry needs to stop in-fighting over a name (IP) which fails as a description and use much clearer labels such as long-term sickness, disability or incapacity.
“As an industry, we should focus more on growing awareness about all long-term products for those who are uninsured or who think they are insured but are not. Greater product clarity is a key part of that. Attempts to grow the market rather than recycle existing business will help close the protection gaps.”