Regulatory changes
There was less regulation of life offices before the arrival of the Financial Services Authority in 2001. The industry has also learnt a lot from the endowment scandal that arose during the 1990s through to the late 2000s.
The consumer duty is a marked shift away from the now-Financial Conduct Authority’s past view of making sure the industry is following a set list of principles. In particular, the industry is now much more focused on delivering better customer outcomes.
Where clients are not receiving protection advice, whether mandated or not, can the adviser really say they have helped deliver better customer outcomes?
Property tenure changes
The notion of owning your own home in UK has been weaved into society through much of the 1950s to early 2000s thanks to falling interest rates, greater access to mortgage lending and government housing policy with initiatives like the Right to Buy scheme.
However, we are seeing a shift in the tenure of UK properties. In the 2021 England and Wales Census the number of households renting has more than doubled since the start of the millennium, while the number of households who own or co-own their property has fallen.
Renters do not have the same need to engage with a mortgage adviser compared to a prospective homeowner. Therefore, mandating protection alongside mortgage advice would still leave this growing demographic worryingly under-insured.
So what is the answer?
While I do not hold the silver bullet to solve the protection gap issue, the industry does share the collective view that the gap needs to close.
Protection advice should not be pigeonholed to a conversation that happens only during the sale of a mortgage, rather it should be viewed as essential to protecting the wealth and health of clients no matter their circumstances.
I am hopeful that, as the consumer duty continues to bed in, we will naturally see a narrowing of the protection gap as it will become an integral part of the wider advice conversation.
The products and services available today are much more attractive and accessible as part of a lifestyle and aspirational conversation that will suit wealth clients as well as those considering a mortgage.
Gregor Sked is senior protection development manager at Royal London
