Don’t look forwards or backwards; just look upwards

Anyone worth their salt in the Protection Industry knows that historically, consumers generally buy financial protection when triggered by one of the following life events:

– Buying a home – Having a child – Establishing a business.

But times are changing.

Housing charity Shelter recently warned that it might take young couples who decide to have children before they buy their own home, double the average number of years to raise a deposit, than those who waited until after they were property owners to have children.

So advisers are facing the emergence of ‘Generation Rent’.

More British families than ever before will be forced to stay renting for longer, and more people may continue to rent for a lifetime.

Surely this is a challenge to the protection industry?  Whether consumers are buying or renting; they still have a regular financial commitment to maintain.  There is still a need for financial protection, just now a lack of opportunities to alert consumers to the risk of not having financial protection.

However, there may be some interference which will prevent many providers and advisers from reading the signals from the protection market easily.

Firstly; house sales and associated mortgages are showing signs of recovery.  The market is moving again and so are people.  The new phase of the Government-backed ‘Help-to-Buy’ scheme has been introduced and also extended to include all homes (not just new build properties) up to a value of £600,000 – allowing people (whether first-time buyers or not) to move up the housing ladder.

Is this a short-term fix?

We think that the majority of advisers will welcome the scheme; and as a result the increased potential to advise on protection products.

But will it be a case that without a significant increase in the number of new homes being built (or perhaps some measure to control housing inflation by the Bank of England), we are likely to be facing a longer term trend that makes homes less affordable for all – not just those wrapped up by the Help-to-Buy Scheme.

The high point of home ownership may have passed, and this surely demands a change of approach by protection providers and advisers who want to see an increase in the number of consumers who pass through their doors.

 

FACT 1: Consumers are feeling the pressure on their income as well as seeing house prices rocket.

RESULT: Fewer people will buy and more people will be forced to continue renting

 

FACT 2: The protection industry is slowly losing an important new route to attracting new consumers.

RESULT: To reach Generation Rent, providers and advisers will have to embrace targeted marketing and advertising to promote a product which has been specifically designed for the rental market.

 

FACT 3: The fall in protection sales may be optimistically disguised by the short term rise in house prices.

RESULT:  Providers and advisers need to work together to devise new ways of alerting consumers to the need for financial protection.  There are new routes to market which are just waiting to be developed (such as lettings agents or housing associations) and new media channels that are just waiting to be explored (such as social media).

 

Even before Help-to-Buy, the market witnessed a spike in (what was referred to as) ‘First Time Buyer’ numbers, but a recent paper by the Council of Mortgage Lenders suggests that borrowers are getting older and that even some ‘First Time Buyers’ are actually those who have previously owned returning to the property market.

In short, all of those who make up the protection industry need to cultivate the motivation, message and means of reaching generation rent – either that or see the market shrink.

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