The Rising Interest in Income Protection: What Mortgage Borrowers are Asking For

In recent months, it appears that mortgage borrowers are becoming increasingly concerned about securing their financial futures, particularly through income protection insurance. A new survey has revealed that the proportion of borrowers seeking advice on income protection has nearly doubled, indicating a significant shift in consumer awareness and priorities within the mortgage market. In August 2023, the Association of Mortgage Intermediaries (AMI) conducted a study involving 3,000 adults and 308 mortgage advisers, discovering that 21% of those who engaged with a broker asked about protection measures, a marked increase from 11% in the previous year.

Growing Interest in Financial Security

This uptick is not merely a statistical anomaly. It foreshadows a deeper trend within the financial advisory sector, where 44% of advisers reported proactively discussing protection options with their clients, albeit a slight decline from the previous year’s 50%. This suggests that while advisers are still taking the initiative, there could be a need to further engage clients about the importance of financial protection.

Changing Dynamics of Protection Conversations

Advisers like Rachel Lummis from Xpressmortgages have noted a significant increase in clients inquiring about various protection products. “There has been a remarkable rise in advisers having more protection conversions and introducing a wider variety of products,” she said, pointing towards a newfound consumer openness to discussing these critical issues. The implications for mortgage advisers are compelling: as consumers start prioritising protections like income cover, there are ample opportunities for financial professionals to educate and advise, thereby creating lasting relationships that could lead to better consumer outcomes.

Advisers Embracing Change

Interestingly, the AMI report also highlighted that 41% of advisers feel that recent regulatory guidelines, particularly the Consumer Duty, have fostered improvements in client outcomes. As the industry grapples with the ramifications of these rules, a noted 41% of advisers are having more conversations about protection products, with 31% discussing a broader range of offerings than in previous years. This is noteworthy in a sector that has historically struggled to prioritize protective measures during the mortgage advisory process.

“This year’s report, titled ‘Making Protection Personal,’ underscores the importance of focusing on the customer’s individual needs and goals,” said Robert Sinclair, chief executive of AMI. This sentiment resonates deeply with me; the more tailored our approaches become, the better equipped we will be to navigate the complexities of modern financial planning.

Younger Generations Leading the Charge

The survey results reveal a fascinating generational divide in attitudes towards income protection. For instance, 65% of younger consumers—defined as Gen Z—consider income protection important, but only 13% have actually taken out such a policy. In contrast, Gen Xers show a greater disparity with 48% deeming it important but only 5% having coverage. This suggests that while younger consumers recognize the significance of protection, actionable steps to secure such measures are still lacking. The conversations around financial security need to be deepened in order to close this gap.

Engaging the Next Generation of Borrowers

Moreover, even among policyholders, only 29% sought advice before securing protection, and many attributed the quality of that advice to the nature of the interaction—whether it was face-to-face, or simply a conversation with a qualified adviser. The statistics show a promising upward trend; notably, 15% of individuals who opted not to include protection in their plans acknowledged that earlier discussions might have influenced their decision. This brings us back to the role of advisers—engagement and communication are key.

The Future of Income Protection in Mortgage Advice

The AMI’s upcoming report launch, scheduled for November 5, 2024, promises to reveal strategies aimed at enhancing the uptake of protection products—an essential discussion for advisers, firms, and insurers alike. The experts, including Carrie Johnson from Royal London, argue that the Consumer Duty regulations are transformative, enhancing the quality of advice and overall service.

Vikki Jefferies from Legal and General Retail echoes this sentiment, highlighting the plethora of opportunities for professionals willing to adapt and meet the diverse needs of contemporary consumers. As the industry evolves to become more responsive to consumer demands, now more than ever is the time for advisers to build bridges with their clients and tailor the protective measures that can safeguard their financial futures.

The growing interest in income protection among mortgage borrowers signals a critical opportunity for advisers. We must harness this momentum and ensure that protection conversations evolve from mere formalities into integral parts of any mortgage advisory discussion. The stakes are high, and the rewards valuable—both for clients and the professionals tasked with guiding them.

To learn more about how to maximize these opportunities, don’t forget to register for the event and understand the strategies to enhance protection uptake in your services.