In a recent Money Marketing article, Richard Harrison said the financial advice industry wasn’t doing enough to engage with younger audiences, arguing that protection products were one way to capture the Gen Z and Millennial demographics.
I don’t disagree with this, but I would add that, in protection, there’s a need to do more than engage — we also need to innovate.
The industry has been working on building awareness for some time via initiatives such as the Income Protection Task Force.
Encouragingly, there’s evidence such efforts are working, with an Association of Mortgage Intermediaries report in November showing that 65% of Gen Z and 70% of Millennials think it is important to have income protection (IP), significantly higher than Gen X (48%) and Babyboomers (39%).
While more young people may be in need of IP, too few are actually buying it
Indeed, separate research suggests they are more likely to need it. A Resolution Foundation report published last year revealed that those in their early 20s were more likely than those in their early 40s to be out of work due to ill health. In addition, a recent Mental Health UK report showed that 34% of 18- to 24-year-olds had taken time off work in the previous year due to poor mental health.
However, a Shepherds Friendly survey conducted last year found that just 9% of those aged 18 to 24 had IP, lower than the average across all age groups of 14%. So, while more young people may need IP and even be aware of this, the problem is that too few are actually buying it.
The question is, why not? Perhaps it’s because product innovation hasn’t kept up with younger demographics.
Mental health
Mental-health provision is one area where it’s clear that work needs to be done. The IP products we’re trying to persuade young people to take out will normally exclude mental-health coverage if an applicant has disclosed mental-health issues in the past three to five years.
Several recent ‘insurtech’ companies in other insurance markets have excelled in this space, gaining traction with younger consumers
It’s widely acknowledged that today’s younger generations are reporting more mental-health problems than previous generations at a similar stage in their lives. This could be due to changing societal pressures, or because previous generations endured mental-health struggles in silence or failed to recognise them. Or it may simply reflect a greater willingness among younger generations to be open about their mental health.
In any case, IP products need to adapt to a society in which the stigma attached to mental-health issues has dramatically decreased. Specifically, we feel that the industry needs to account for these changes and the increase in mental-health-related disclosures that this will inevitably cause.
We’re in the early stages of a project to develop a more holistic approach to underwriting mental-health problems, with a greater emphasis on flexibility, inclusivity and resilience. We believe it’s important to differentiate between various types of mental illness and consider mental-health resilience, rather than rely on a one-size-fits-all approach.
Perhaps product innovation hasn’t kept up with younger demographics
Currently, most insurers will treat someone who took a short period off work after an external shock such as an unexpected bereavement in the same way as they treat someone with a serious mental illness, and apply a mental-health exclusion to both their policies. But the two circumstances are very different and we think the current approach is a bit crude in categorising them in the same way.
‘Digital natives’
Another key area where there’s great potential for innovation is the design and delivery of products tailored to younger generations.
Gen Z and Millennials are often referred to as ‘digital natives’, having grown up with smartphones and iPads. The products we offer them must align with their desire for convenient, simplified and engaging experiences.
We are not at the start of this particular journey. Progress has been made in this area, but there is still more work to be done to cater for these generations’ preferences.
In protection, there’s a need to do more than engage — we also need to innovate
Several recent ‘insurtech’ companies in other insurance markets have excelled in this space, gaining traction with younger consumers. Notable mentions include pet insurer ManyPets and car insurer Marshmallow.
With so many creative and adaptable professionals in the protection industry, there’s no reason why similar results can’t be achieved. By putting the consumer at the centre of our thinking and addressing the archaic processes of the past, I’m confident the protection industry will have its Uber moment.
Daniel Simpson is chief innovation officer at Shepherds Friendly
This article featured in the March 2025 edition of Money Marketing.
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