Nearly half (44%) of UK workers overestimate the monthly cost of income protection, life cover, and cash plan policies according to research from health and protection provider, The Exeter.
This data is the result of an extensive survey of 2,000 UK workers, which aims to highlight their most pressing financial and health concerns over the past year. The message was clear: affordability remains key, with 40% of UK workers naming it as the most important factor when considering insurance products.
However, The Exeter's most recent Health & Financial Fears report also brings to light a significant gap between perceived cost and reality. This highlights an ongoing need to address misconceptions surrounding the cost of insurance, which strongly influence an individuals' decision when purchasing cover.
Key points from the research include:
• 37% of UK workers overestimate the cost of both income protection and life cover policies.
• In the case of cash plan policies, which are a cost-effective insurance option, the percentage of UK workers overestimating the cost rises to 59%.
Additionally, when asked to estimate the average monthly cost of products, UK workers continue to overestimate the financial commitment:
• Those surveyed predicted the monthly cost of income protection to be £35.20 per month, higher than the actual average of £24 for a two-year limited benefit term – a product in high demand in 20221.
• Similarly, life cover also shows a disparity, with a mean predicted cost of £34.70, higher than the actual average of £26 per month1. Interestingly, 7% of UK workers believe the cost would exceed £76 per month.
• Cash plan policies are not exempt from these misconceptions, with a predicted cost of £34.90 per month, despite plans starting from as little as £7.
Surprisingly, respondents underestimate the monthly cost of private health insurance as well, estimating a monthly premium of £43.30, with the actual average cost being £852. highlighting the importance of guided options.
The Exeter’s data also shows that a sense of uncertainty around the cost of insurance is prevalent among UK workers. One in five (19%) responded by saying "I don't know" when estimating the cost of a private health insurance policy. This uncertainty was clear on other insurance products too, with 20% of UK workers uncertain about the cost of income protection, life cover (16%), and almost a third (32%) for cash plans.
Steve Bryan, Director of Distribution and Marketing at The Exeter, commented: “The implications of these findings are profound. Despite widespread awareness of protection and health insurance products amongst UK workers, they are missing out because of misperceptions around price. More worryingly they are likely disregarding insurance without being aware of the options available.
“As an industry, we have a collective responsibility to challenge perceptions around affordability so that financial resilience and access to private healthcare become valuable options for more consumers.”
Emma Astley, Managing Director at CoverMyBubble, added: “It’s sadly unsurprising that consumers have some real misconceptions about the cost of protection and health insurance, as it’s something that we often face with new clients. You have to wonder how many UK workers would benefit from protection and yet never have a first meeting with an adviser to discuss their options, as they assume that they simply cannot afford the premiums.
“For many consumers, the idea of protection often also starts and ends with life insurance. Many would benefit from considering income protection or health insurance during these turbulent times, and it’s a question for advisers and insurers on how to increase consumer awareness of both product options and accurate costs.”
The full Health & Financial Fears 2023 report can be viewed here.
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