Experts (including those at www.abi.org.uk) fervently believe that alongside of existing policy reviews into the provisions, procedures and protocols surrounding key financial products such as savings, investments and retirement-specific examples, the government’s Financial Advice Market Review should also focus its wide-ranging attentions on the widening gap found within income protection insurance fields, ahead of delivery of the think tank’s findings in time for the Budget 2016. Identified for a while now as being something of a grey area in terms of the insurance family as such, concerned parties with a wealth of knowledge on the subject feel that its continued low coverage levels should be addressed sooner rather than later, and see this year’s budget as the ideal time to present a case which will help its cause going forward.
Amongst suggestions of workable ways in which the shortfall on uptake of income protection insurance policies can be turned around is making more of a concerted effort in highlighting what the risks of failing to have such a policy in place could be for individuals and families here in the UK. Looking at the much broader picture, and internationally Britain doesn’t compare favourable, with income protection plans being snapped up by a mere 11% according to recent figures; a statistic which is further backed up by a poll undertaken by the Money Advice Service of late which suggested that nearly 50% of working age couples (and families) in this country neglect to arrange a suitable income protection insurance policy as a financial safeguard (and indeed, lifeline) should the main breadwinner’s income source face uncertainty for a number of reasons.
Furthermore a study conducted by the Centre for Economic and Social Inclusion (which was commissioned on behalf of the Association of British Insurers) shed light on the fact that 10.6 million households would be significantly hit (in terms of earning potential) in the event of the predominant earner being forced into the cessation of work due to poor health or a serious injury sustained. That equates to some 60% of working families in the UK, whose lifestyle would suddenly be compromised almost overnight as funds relied on dried up. And essentially it’s this very reason which has mobilised financial experts in a bid to raise awareness of the consequences of not having an income protection plan in place, not least by lobbying government to include a more targeted response to this news as part of new guidelines being drawn up about the industries like insurance.
Consumer Awareness of Vital Role Income Protection Plays in Safeguarding Personal Finances Needs Timely Revisions
From a government perspective, objectively seeking to reduce the protection gap during a time of financial hardship would in itself bring with it savings per se, with expenditure on benefits, higher tax revenue and improved productivity just a few elements which would be minimised as a result, according to the ABI. Ergo insurance movers and shakers believe that it’s imperative that the government-actioned Financial Advice Market Review’s recommendations (when they arrive) must strive educate insurance consumers out there about the advantages of income protection policies and conversely, the pitfalls resultant from overlooking the critical role they could play in their lives at a certain, unpredicted juncture in the future. Among the revisions to current legislation in place being mooted are provisions to regulate the advice on such cover being clearer and more simple to follow, teamed with stakeholders promoting a greater degree of knowledge about the financial implications of failing to seek protection plans. Effectively greater demand for the product will only stem from more widespread advice being made available to attract income protection newcomers.
For its part in the bigger picture, the ABI itself is talking up a potential workplace Protection Statement, whereby the public would be granted ready access to, perhaps, an imagined statement which would afford them a timely heads up on individual/family’s combined income from both their employers and the welfare state, in the context of their work situation being challenged by the onset of unseen (and career-threatening) illness or injury. The way the ABI sees it is that this statement (or personal database if in an alternative guise) could be channelled via a person’s P60 or online tax account; ultimately making them privy to a more accurate portrayal of the levels of financial support actually available to them if they didn’t elect to arrange a dedicated income protection policy with an insurance provider.
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