"When the regulator checks on progress, firms will want more than good intentions to show for it."
- Simon Smith - Cream Financial Solutions
Cream Financial Solutions has set out a four-point plan that it believes could help to close the protection gap, after the FCA gave the protection industry 12-18 months to show "meaningful progress".
Cream says the key to meeting the challenge is to focus on steps that can be put in place quickly, such as implementing referral partnerships, while the industry implements long-term solutions.
In its Pure Protection Market Study, published last week, the FCA found that 58% of adults have no protection in place, and of these, 59% have never considered it.
The Protection Distributors' Group (PDG) will lead a consumer awareness campaign, while the AMI will lead work to help advisers improve how they discuss protection with customers.
Cream’s plan suggests that mortgage brokers double down on referral pathways when they do not have the capacity to advise on protection themselves, especially where underwriting may be complex.
In addition, the plan highlights the potential benefits of a social media campaign that focuses on emotional drivers. It suggests that the PDG's campaign should run mainly on social media, where it can be launched within weeks and reach renters, who may never sit down with a mortgage adviser, and the self-employed, who have no employer sick pay to fall back on.
According to Cream, the social media campaign should say little or nothing about products and focus on the emotional reasons people take out cover, such as family and the things they love.
Thirdly, the plan includes changing the way advisers talk about protection in client conversations to reduce jargon and ensure advisers open with what matters to the client, such as their children, their income, or their future goals, and what could happen if illness or death were to occur.
Finally, the plan suggests a rethink of the industry’s commission model. Cream says providers should explore a hybrid commission model that lets firms choose how much commission they receive up front and how much is paid over time as premiums come in, although it says this may take more time to implement.
READ MORE: Why protection still struggles to compete for consumers' attention
"We're confident that the work led by AMI and the PDG will make a real difference in the long term, but the FCA has made it clear it wants to see progress sooner than that. The clock is ticking," Simon Smith, managing director at Cream Financial Solutions, said.
"We're on the front line of protection advice every day, and we can see what can be done now. When the regulator checks on progress, firms will want more than good intentions to show for it.
"Advice has become more specialised. It happened in wealth, where pensions and investments became disciplines in their own right, and the same can be said about mortgages and protection. Most mortgage advisers are perfectly capable of arranging cover, but their focus is on the mortgage.
"If a firm can't give protection the time it deserves, it must either invest in dedicated in-house resource, which not every firm will be able to do, or partner with a specialist to make sure its clients are properly covered. These pathways can be set up quickly and can ensure a firm’s clients receive better outcomes."
"Nobody wakes up in the morning and decides to buy critical illness cover. They wake up and buy a new pair of trainers," he continued.
"So make it real. Ask a parent what they do with their kids at the weekend and how they'd feel if they couldn't do it anymore. The dance lessons, football training, the things that make their child happy – that's what income protection pays for. Once people recognise its value, you don't need to sell anything to them."
