Conversations around protection must become more common and embedded into the advice process to close the policy gap, Stephanie Charman, chief executive of the Association of Mortgage Intermediaries (AMI), said.
In her speech at the AMI Annual Dinner last week, she said the Financial Conduct Authority (FCA) deciding not to intervene in the market following its Pure Protection Market Study did not mean that the sector’s work was complete.
Nevertheless, the study’s conclusion provided some reassurance, demonstrating that firms had invested “huge amounts of time, resource and effort into strengthening governance, fair value assessments, Consumer Duty frameworks and oversight”.
Broaching the subject of protection
However, “the FCA’s findings around the scale of unmet protection needs reinforce something everyone in this room already knows – consumers rarely buy protection proactively,” Charman said, referencing data that 58% of adults in the UK did not have a protection policy in place.
She said most conversations about protection were prompted by advisers, and few clients bought protection proactively.
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Charman stressed that protection “cannot remain an afterthought”, as many consumers who never met an adviser would not take out a policy at all.
She added: “We need to normalise a protection conversation with smarter prompts and nudges, thinking more creatively about where those conversations can be introduced throughout the mortgage journey.”
Penetrating the market
Charman put the question to lenders in the room, asking how protection awareness could be embedded further into the mortgage process, querying: “Is this through mortgage documentation and application journeys?”
She said it was expected to warn consumers that they risked repossession if they did not keep up with mortgage repayments, and suggested that people should be encouraged to think of how they would maintain payments if their lives changed unexpectedly.
“These are exactly the conversations AMI will continue leading through our engagement and future work with the FCA, with more to come on this in the coming weeks,” Charman said, announcing that the organisation’s Protection Viewpoint for this year would focus on how consumer behaviour, artificial intelligence (AI) and changing advice models were reshaping protection conversations.