Data shows clients remain more receptive to critical illness cover than income protection. Phil Nash, Chief Sales Officer at Shepherds Friendly, explores the reasons behind this in the following piece.
Ask most people which sounds more reassuring – a five‑figure lump sum payout if they contract a serious disease, or £1,500 a month if a bad back keeps them off work – and you can probably guess the answer.
But households don’t usually come financially unstuck because of a diagnosis itself. They come financially unstuck because their income dries up while the mortgage, bills and childcare costs continue. With NHS waiting lists what they are, that’s just as likely – if not more – to happen as the result of a bad back or injured knee than a critical illness. And yet, as the FCA’s Pure Protection Market Study shows, there remains a higher take-up of critical illness (CI) cover than income protection (IP).
As someone who has worked both in the adviser’s chair and on the provider side, I’m convinced that IP should sit at the heart of protection conversations. Yet I also understand why it often doesn’t.
Why IP is harder to sell
Some of this comes down to legacy. When I started out as an adviser, CI plans were relatively straightforward and easy to explain. They typically focused on a short list of serious conditions – cancer, heart attack, stroke, multiple sclerosis – with a promise: if X happens, you get Y. Clients could picture those events, and understand what a lump sum would mean.
Historically, IP was pricier, and it also demanded more adviser work, factoring in employer sick pay, state support, deferred periods, claim duration and benefit limits tied to salary.
The FCA’s study suggests clients also don’t fully understand what they’re purchasing. Almost a third of those who’d bought IP wished they’d had a clearer explanation at the point of sale – the highest proportion across the products covered.
Research carried out for Shepherds Friendly last year reveals there are a number of misconceptions about IP. These include that it covers medical bills or redundancy, and that it pays out a lump sum. Recent feedback from advisers we work with suggests many people believe it can cover any amount they choose, rather than a percentage of their salary. When all of these ideas collide with fears of invasive medical questions, percentage-of-salary limits and underwriting, clients lose interest.
We shouldn’t ignore our own behaviour as an industry either. For years, menu plans have encouraged a life‑plus‑CI mindset. CI is the right choice for many, but life-plus-IP is also available and may work better for others. However, as it demands more explanation and time, when faced with a client on a tight schedule and a finite budget, it is tempting to prioritise cover that is easier to position and quicker to process.
Why income is fundamental
The problem with this is that most households don’t have the spare cash to carry the mortgage and bills for long if their income stops. A recent survey by Finder shows two‑fifths of adults have £1,000 or less put aside, while last year’s FCA Financial Lives Survey reveals one in 10 have no cash savings at all. If their income stopped, many would struggle to cover even a month of outgoings.
Both the FCA pure protection research and our own survey suggest that people become more receptive to protection after they’ve experienced income loss. Advisers also tell us that clients with first‑hand experience of illness are more open to IP.
A back injury can keep a tradesperson off the tools for months. Such a scenario wouldn’t trigger a traditional CI payout, but IP is designed for precisely such events.
None of this is an argument against CI. For many people, especially those with dependants and big one‑off liabilities, CI is vital. The real issue is what takes precedence.
Making IP easier for clients to say yes to
If IP is difficult to sell, we should change the way we frame and structure it.
First, start with the employer. Many clients don’t know their workplace benefits. If I were back in the advising game, I’d ask clients to speak to HR before our first meeting. It changes the tone of the conversation if you can say: “We can see you’re on full pay for three months, then half pay for three months, then nothing – let’s plan around that.”
Second, lean into bespoke solutions. Many advisers still run IP to retirement age with a short deferred period. Yet that can price clients out. Put multiple options on the table: to age 60 instead of 67, a three‑ or six‑month deferment for a lower premium, or a limited benefit period that still protects the household. When you work around their budget, clients are more likely to be receptive.
Third, keep to plain English. Skip the jargon and ask practical questions: “If your pay stopped next month, how long before you’d struggle to cover the bills?” “Whose name is on the mortgage?” “Which payments can’t you miss?” Once they’ve pictured that, the case for IP becomes obvious.
The gap between how often IP is needed and how often it’s properly explained is still too wide. Closing it doesn’t mean abandoning lump-sum cover, or forcing IP onto every client. It means starting with the basics – what keeps this household running each month – and then putting the right protection in place.
Phil Nash is Chief Sales Officer for Shepherds Friendly
