Swiss Re has a new report ‘The European Insurance Report 2010, Customers for life', which says that hundreds of thousands of people across Europe do not have enough life insurance.
The report also includes the results of a survey commissioned by Swiss Re among more than 11,000 consumers. According to the survey:
Consumers have a clear need for life insurance, but many are unaware of how it can help deal with the financial impact of death, illness or disability
Perceived cost is a barrier to buying cover, whereas life insurance products are in practice affordable and within the price people are prepared to pay
Consumers are generally at ease using existing distribution channels to buy life insurance, but insurers need to engage better with consumers and build trust in the industry
In Swiss Re's view there is a sizeable untapped potential for life insurance to protect people's financial needs effectively and affordably in the event of death, illness or disability.
The survey indicates that most consumers in Europe see the need for some form of financial protection in the event of illness or untimely death. Only 11% claim to be well positioned financially if they die, or suffer a long-term illness or disability.
But the survey also shows that many people over-estimate the amount of life cover they hold, and that large numbers regard savings as the main way to cover death or sickness. And it reveals that a staggering 26% of consumers expect to rely heavily on government benefits in the event of financial misfortune due to death or illness.
The report urges life insurers to better ensure that potential customers understand the true value of protection insurance.
Asked what stops them buying an insurance product, 48% say price is an issue. But nearly half would pay for a life insurance policy.
The way a product is distributed has a strong influence on consumers' comfort level and confidence in buying life insurance.
Traditional sales channels such as independent advisors and insurance company salespeople are among the most popular, followed by sales conducted over the internet. But fewer than 10% of respondents favour alternative forms of distribution such as supermarkets.
Asked the main reason against buying life insurance cover, on average one in every 10 people say that trust is the main barrier preventing the industry from fully engaging with them. Swiss Re believes that life insurers can counter this by promoting the benefits of protection cover more proactively.
Martin Albers of Swiss Re says, "We need to be bolder in selling the benefits of insurance – of how lives can be rebuilt after illness or injury, or of how families can be saved from financial hardship through the security of a life policy. We also need to highlight the value of life insurance compared with other sources such as savings and government provision, and to show that life insurance is often the most affordable and suitably responsive solution to people's financial needs.
Standard Life recently shocked the insurance advisor world it works with by admitting that it was considering selling direct to the public as the insurer argues that 70% of the public never deals with any independent financial advisor.