Boosting Gen Z Income Protection: Adviser strategies to close the protection gap

Daren Boys, Protection Portfolio Distribution Director at Aviva, shares insights from Aviva research highlighting awareness of income protection and the opportunity that advisers have to help close the protection gap among the younger generations.

New Aviva research highlights that over two-thirds (67%) of UK adults would struggle financially if they were unable to work due to ill health. This concern is even more pronounced among millennials aged 28-43, with 78% expressing financial vulnerability and indicating the critical need for income protection.

Despite these concerns, a significant majority (71%) of UK adults have never considered income protection. Among these, around one in five have never heard of the product, with this figure rising to a quarter among Gen Zs.

Financial coping strategies

The research also sheds light on how people would manage financially if they were unable to work long-term. Just under half would rely on their savings, while slightly fewer would cut back on non-essential spending. A third would opt for lower-cost brands to manage their expenses.

Around two in five would seek financial support from other sources, such as borrowing from friends or family, relying on someone else to cover costs, or taking out a bank loan. Additionally, just under a third would depend on state benefits.

Barriers and triggers to purchase

The study reconfirmed two main barriers to purchasing income protection: perceived cost and lack of awareness. Over a quarter of respondents felt they couldn’t afford the product, while a similar number didn’t think they needed it. However, over a quarter indicated they might consider income protection in the future, and fewer than a third said they would never consider it.

Perhaps unsurprisingly, buying a house emerged as the top life event prompting individuals to consider income protection. In sharp contrast, however, fewer than one in ten would consider it when moving into a rental property, highlighting an opportunity to raise awareness about the importance of financial protection, regardless of home ownership status.

Interestingly, just under half of Gen Zs, who represent a high proportion of renters, said they might consider income protection as they get older. This presents a key opportunity for advisers to engage with this demographic and grow their income protection portfolios.

Income protection: The most appealing product for Gen Zs

Aviva’s research found that income protection is the most appealing protection product for younger generations. Almost a third of Gen Zs said they would actively consider it, with three-quarters showing some interest. Among those without income protection, three in four expressed a desire to learn more about it, indicating that barriers to entry are more about education and awareness than rejection or distrust.

Although Gen Zs are digital natives, the research highlighted the importance of human intervention to aid understanding and build trust. This underscores the essential role advisers can play in raising awareness of income protection among this audience.

Conclusion and adviser recommendations

Income protection provides a much-needed safety net. Through the great work and focus across the industry via initiatives such as Income Protection Task Force (IPFT), we have seen income protection sales across the market rise. Our research shows there is still yet more to be done to close that lack of awareness of how income protection can create financial resilience across wider customer segments.

So, there is a real opportunity for advisers to tap into this and speak to younger audiences about income protection. Many Gen Zs are currently renting, but they have an optimistic ambition to achieve key milestones in their future and are motivated to secure a stable future for themselves and their loved ones. This future-focused attitude can open the door to starting conversations about income protection now, rather than waiting until they reach traditional milestones like buying a house.

We can help advisers access valuable resources to support renting clients on Aviva’s Tenant protection hub or by reaching out to their local Aviva Protection Business Development Manager (BDM).

References

Aviva’s GEN Z Insight Research, January 2024

The research was conducted by Censuswide with 1,002 UK employees of working age (16-65) - (full time OR part time) who do not currently hold a personal income protection policy (minimum of 250 Gen Z respondents) between 09.09.2023 - 13.09.2023. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles and are members of The British Polling Council.