The release of the latest LV= Reaching Resilience report once again highlights the disconnect between how people think they will cope if unable to work through sickness or illness, and the reality.
Almost seven in 10 of those surveyed felt they were financially resilient; a highly promising headline statistic. However, in-depth questioning suggested there might be more than a degree of wishful thinking at play.
Among respondents, almost half expect to use savings and rainy-day funds to get them through a period where they can’t work due to illness or injury. But that doesn’t stand up to much scrutiny alongside the fact that 42% of workers have less than £10,000 in savings, and one in 10 has no savings at all.
Perhaps the finding we all need to ponder is that 77% of renters had never seen a financial adviser
After savings comes a familiar rollcall of relying on either sick pay, a partner’s income or state benefits. The ability to draw help from a policy is a long way down the list, with just 7% of workers citing a critical-illness or income protection policy, which they personally pay for, as something they would rely on.
It’s startling to note that a bigger proportion say they would have to carry on working even if they became ill or injured.
First-time buyers
The report gives insight by different core groups, including first-time buyers (FTBs).
FTBs remain confident of their resilience, even though one in three has less than £5,000 in savings and over half would be able to manage for just two months if they didn’t have their income. More than half of respondents indicated that they needed both incomes to be able to meet their monthly outgoings.
Added policy features should also help to turn customer attitudes around
The point at which many families start to consider protection is often when they buy a first home. It’s well documented that the challenges for FTBs seem only to grow in terms of affordability; something not eased by the increase in interest rates in recent years.
That has pushed up the average age at which many FTBs take the first step on the ladder. Although we have seen some signs of improvement among younger buyers, the general trend has been for growth of first-timers aged over 35 and 40.
Delayed awareness
The shifting of this financial milestone into later adulthood poses some consequences.
There’s a delayed awareness of financial protection and many young adults may not consider protection policies until later, potentially after having already started a family.
It’s tempting for customers to want to pick one type of policy over another
That poses its own challenges for advisers because clients will already face higher premiums for protection products, especially if they’ve also developed health issues.
Drill down
However, this only serves to underline the continuing importance of advice. Given how households tend to over-estimate their resilience, it’s important for someone to reframe the conversation and drill into how they will really cope.
As well as identifying the need, being able to highlight the benefits and how products can work together within a budget will help to turn protection from an outgoing to be avoided into something that is seen as the bedrock for securing their dreams.
It’s startling to note the proportion that say they would have to carry on working even if they became ill or injured.
Awareness of how advisers can help to mix and match products as well as maximise the level and quality of cover is also important. The shift towards the use of plain English should help with customer understanding, but it requires advice to spell out the potential differences in policies and why one may be more suitable than another.
Customer attitudes
It’s also tempting for customers to want to pick one type of policy over another. Helping them understand why it can be sensible to take an element of critical illness alongside income protection, and the benefits of two single policies over a joint policy, will all continue to be key to convincing customers of the need to close their protection gap.
Added policy features should also help to turn customer attitudes around. For example, many will see a very real benefit and value in having virtual GP appointments available on demand.
There may be more than a degree of wishful thinking
While all are agreed that advice remains critical for customers to have an improved understanding and appreciation of protection, and although there are plenty of worrying statistics in the LV= report, perhaps the finding we all need to ponder is that 77% of renters had never seen a financial adviser.
With FTBs getting older, it will only become more important to find ways to reach a broader audience.
Edward Jones is protection advice director at London & Country
This article featured in the February 2025 edition of Mortgage Strategy.
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