Income protection remains critically undersold, but the way brokers structure referrals may be the key to closing the gap
The UK's protection gap will not close on its own, and the mortgage industry bears much of the responsibility for keeping it open.
Craig Head (pictured top), director at Mortgage Required, believes the way brokers handle protection referrals is at the heart of the problem.
The scale of the challenge is stark. According to the FCA's Financial Lives survey, just 6.2% of UK adults held income protection insurance as of May 2024, compared to 28% who held life insurance. Mortgage Required has structured its business around a deliberate separation of mortgage advice and protection advice, with a dedicated team operating under the name The Insurance Room handling protection exclusively, taking referrals from mortgage advisers across the country.
"When you're a very high business writer, if once you get good at the job and you've got a big client bank and an existing client bank and all the rest of it, you get very busy on the mortgage side," Head told Mortgage Introducer. "And naturally, because of the pressures of that and trying to secure rates and getting on to clients and your bread and butter, your standards can sometimes slip, and the time that you can attribute to talking to clients about protection can get lower."
The result, he argued, is a structural inconsistency across the broker market – one where a client's experience of protection discussions depends almost entirely on which adviser they happen to use.
"You could see five mortgage brokers sometimes, and if they do it in different ways, some will discuss it, some will go into it in an awful lot of length, and some won't mention it at all."
Why is income protection so consistently undersold?
The issue goes beyond time pressure. Head said that many busy brokers default to more straightforward products – term policies and basic life cover – rather than engaging with the more complex protection landscape that includes income protection and family income benefit.
"What you tend to find is that a lot of those will just sell maybe more basic policies, or those that are perhaps more straightforward and simple, and maybe gravitate towards the same old providers," he said. "So maybe a DTA or an LTA, or something with a little bit of kick in it, or something that's fairly straightforward, as opposed to taking a long time to really understand what the client might need."
The statistical picture, he argued, is the wrong way around. Clients are far more likely to spend a period unable to work than they are to die before their mortgage is repaid, yet life insurance remains the dominant product sold, with income protection consistently overlooked across UK mortgage advice.
"The amount of life policies that clients will get, the amount of critical illness policies that clients will get, will be vastly higher than income protection and those kind of things, and yet they're much more likely to claim on something like that," Head said. "And once clients understand it, it's a bit of a no-brainer."
What does the FCA require from brokers?
Head acknowledged that the Financial Conduct Authority (FCA) has moved to tighten its expectations around protection conversations in recent years, with guidance that requires brokers either to demonstrate they are actively discussing protection with clients or to show they are referring clients to someone who can.
"You have to make a choice that either you are going to evidence that you're actively discussing it and selling it with your clients, or if you're not doing that, then you need to actively show that you're now referring those clients out to someone to do that," he said.
The referral model has driven more mortgage brokers towards The Insurance Room, he said, as firms seek a compliant way to fulfil the requirement. But he was candid that guidance alone is not enough, and that protection advice standards across the broker market will only shift meaningfully if the regulator moves to enforcement.
"I still think there's still many, many, many firms out there that are just carrying on doing exactly what they were doing before. I think until the FCA start to evidence – to say that this company, these companies, we've been doing this – and then there's fines or there's some sort of comeback and evidence that they've been auditing this and checking on it, I don't think maybe a lot will change."
Life insurance as a conversation starter, not a destination
Head's prescription for the industry is a reframing of how protection conversations begin. Life insurance, he suggested, should function as an entry point into a wider discussion, not the endpoint it so often becomes.
"Life insurance is the conversation starter. It gets it progressed. But too many brokers in too many places will just say, oh yeah, we'll look at the life insurance, we'll do you a life insurance, or we'll do a new one. And there's just no real discussion about whether that is actually what they need or of any use to them."
He pointed to single clients with no dependants as a clear example of where life cover alone fails. For someone without family relying on their income, the priority should be protecting their ability to pay the mortgage if they cannot work, not ensuring broader protection advice keeps pace with UK mortgage lending volumes.
"The conversation should always start really with, do you have income protection? And if someone says no, you say, well, you should really look at that, that's what you need. And the life insurance should be kind of the tag-on that's cheap and the bolt-on just for the sake of having it, but it's completely the other way around."
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