For ‘In Focus‘ Jo Miller, Managing Director of the Income Protection Task Force (IPTF) explores whether the industry is focusing on the right protection gap. Looking beyond product awareness, Jo considers how education and early conversations could help create a more financially resilient future generation.
We often talk about a Protection Gap in this industry. In doing so we are attempting to quantify the number of people who don’t have protection cover and are therefore financially vulnerable. If we have a number, we can measure whether or not we are closing the gap (spoiler alert, we’re not).
It’s a logical approach, particularly for a profession that likes to quantify things such as risk and impact. Could it be, though, that we’re missing a trick? Is there, dare I say, an arrogance to suggesting that there is a protection gap – implying, however gently, that the population at large isn’t buying our products?
Do we need to go right back to the start? Are people choosing not to buy our products or is it possible that they don’t know there are products to be bought? Is the gap not one of protection but rather one of awareness?
As the parents of two sons rapidly approaching the end of their school years, I am acutely aware of just how underprepared they feel for real life. The number of lessons or discussions they have had during their years at school about finances, budgeting or insurance can be counted on one hand (potentially one finger).
Is it any wonder that their to do list on leaving education does not include getting their financial protection sorted and in place? (Despite their mother’s nudges).
Despite this, they are acutely aware that it is not smooth sailing ahead. When we consider what GenZ and Alpha have lived through it is perhaps no surprise: financial crises, global conflict, political instability, cost of living crises and a pandemic to name a few.
Where their parents might have expected to find a job that saw them most of the way through their career if they so wished, the generations coming through have no such expectations. They are acutely aware that they need to expect the unexpected. They are less aware, however, of how to prepare for it.
For many years, as an industry, we have discussed whether we need a collective effort, an industry-wide advertising campaign, but somehow it has never quite got off the ground, with various concerns and disagreements halting progress despite agreement in principle that something needs to be done.
Perhaps there is another way to look at this though. One of the key objectives of any such marketing campaign would be awareness and education. What would happen if we started with education?
Financial education is patchy at best. Ask anyone at an industry event (and trust me, I have tried many times) if there is a need to improve standards of financial education in schools and colleges, and I challenge you to find anyone disagreeing. There is currently no compulsory element to the national curriculum to teach young people even the basics.
Even those choosing to study subjects such as business and economics will focus on macro level rather than any consideration of their own finances.
The recent announcement of changes to the curriculum still lacks any form of compulsion, and the result of all of this is a population who leave school without any firm understanding of budgeting, of how to have a healthy relationship with money and certainly not a clue about the steps they could take to be more financially resilient.
Neither are they exposed to the extent, or lack thereof, of State support, and by the time they begin to have conversations about financial products such as mortgages, employee benefits and pensions, assumptions are well developed.
As the industry who understand risk the best, surely we should view getting into schools and colleges to have these important conversations with young people as essential; a direct route to a more financially (and protection) literate population.
What we need, of course, is people who know about protection who are willing to do just this. If only we had underwriters, claims managers, product specialists, distribution heads, advisers and marketing teams willing to share their experience of working in financial services, the difference they can make and the opportunities that exist for young people, not only to insure themselves cheaper than it will ever be but also to potentially find a career.
It’s important that the conversation is not a corporate conversation but one that is human, relatable and highlights how it feels to have a plan.
If you’ve read this far and think this sounds like a good idea, you’re in luck. Financial Foundations is the name of the latest initiative developed by the IPTF, which aims to bring together protection industry professionals as an army of volunteers visiting schools to give a presentation that aims not to sell a product but to equip young people to make informed decisions about their own financial situations when the time comes.
It is the kind of altruistic mass movement that might just have an impact on the awareness gap and, longer term, the protection gap.
The potential of the initiative reaches beyond schools to any setting with young people including colleges and workplaces with apprenticeship and graduate schemes. We should not limit ourselves and instead seek to create a consistent presence for young people. Can we be a sector that shows up for young people thinking about their financial futures?
The protection gap is considered by some a market failure. That can be debated, but it is clearly a communication failure, and that means it can be fixed.
Our industry is full of people working hard because they genuinely believe in what we do. If that’s the case, the question for us must be: why wouldn’t we at least try this? A small bit of effort and support for this investment creates a return on investment in so many ways. If not now, then when?
