"For advisers, this creates a significant opportunity: education, reassurance and clearer communication could help more clients recognise the value of protecting their income."
- Dan Simpson - Shepherds Friendly
Shepherds Friendly has found that just 16% of full-time workers have income protection (IP) insurance cover.
The mutual’s latest income protection survey of 2,000 UK adults revealed that despite a 2% increase from last year’s, IP is still one of the most overlooked insurance products on the market.
This is despite the fact that 81% of those without cover are currently renting or have a mortgage, 44% have children under the age of 17, and 28% are single and at a higher financial risk if unable to work.
When asked what would lead those currently without cover to talk to a financial adviser, 28% said a free consultation, followed by 22% who cited no broker fees and 12% who said clear, jargon-free advice or online reviews and testimonials, while 19% said nothing would persuade them.
In terms of products, 43% of those without cover said price would be the most important in considering a protection product, while preventative care was the most preferred benefit.
Offering a range of health services designed to diagnose conditions topped the list at 26% alongside access to a virtual GP service, which rose to 34% among 25-to-34-year-olds. Access to cancer screening and physical care such as physio were joint second at 25%.
20% of full-time workers aged between 18 and 64 experienced a period where they were out of work and didn’t receive their usual earnings, rising to 40% for those aged between 18 and 24.
The main concern from all age groups was inflation and the rising cost of living at 68%, with those aged between 18 and 44 seeing it as the main threat to their income over the next five years. Fears of an economic downturn was the second-highest factor at 60%, above illness and a long-term health condition at 51%.
AI’s potential impact on job security was cited by 48% of respondents as a concern, while 46% feared accidental injury would impact future earnings, rising to 68% for 18-24-year-olds.
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In total, 38% of respondents expected factors outside of their control to affect their income within the next five years. Shepherds Friendly says this suggests many workers are aware of the risks of losing income despite not having protection in place.
While 14% of respondents said they didn’t know what IP covers at all, 70% of those surveyed had heard of income protection as a product, with awareness increasing with age.
However, 41% of respondents without a policy believed IP covers redundancy, and 49% thought that lifestyle factors such as drinking alcohol regularly or existing health conditions would automatically rule them out of cover, increasing to 57% for 18 to 24-year-olds. These misconceptions remain common across every age group.
"The findings from this year's research suggest that low income protection take-up is not primarily driven by a lack of awareness," Dan Simpson, chief commercial officer at Shepherds Friendly, said.
"Instead, misconceptions about what the product does, concerns about eligibility and uncertainty about its value appear to be preventing many consumers from engaging with protection conversations.
"For advisers, this creates a significant opportunity: education, reassurance and clearer communication could help more clients recognise the value of protecting their income.
"Price remains the dominant purchasing factor, but health and wellbeing benefits are also popular. There is therefore an opportunity for advisers to demonstrate both the protection and wider support available through modern policies to help improve engagement."
