Insurance Watch: When life stops going to plan – Mortgage Strategy
For years, the protection industry has focused on a relatively simple question: who has cover and who doesn’t?
It’s an important measure, but it may not be the most revealing one.
A growing body of evidence suggests the bigger issue is not simply protection ownership but financial resilience. More specifically, how exposed would a household be if illness, injury or bereavement suddenly disrupted its income?
Two recent reports, one examining financial resilience and the other the protection market, bring this issue into sharp focus. Viewed together, they suggest that millions of people remain far more financially exposed than they realise, with limited resilience to absorb a prolonged financial shock.
A conversation about financial resilience is unlikely to end with a single policy recommendation
The Financial Conduct Authority’s report into the distribution of pure protection products found that 58% of people held no protection products and that 59% of those without protection had never considered their protection needs. At the same time, Royal London’s Financial Resilience Report found that 30% of UK adults were financially fragile, with average discretionary income of just £77 a month after housing costs, household bills and food costs had been paid.
Read together, the reports suggest something important: protection gaps and resilience gaps are often the same thing.
The FCA’s report repeatedly returns to the idea of financial resilience. It talks about helping consumers withstand the consequences of illness, incapacity and bereavement. The concern isn’t just whether somebody owns a policy. It is whether their finances can survive when life stops going to plan.
This becomes especially clear when viewed through the lens of a mortgage conversation.
The mortgage process remains one of the few moments when clients are actively engaged with their finances
Every day, advisers review income, expenditure and affordability. They see household finances in greater detail than almost any other profession. They understand the commitments clients are taking on and the long-term responsibilities attached to them.
‘Financially fragile’
Yet affordability and resilience differ greatly. A client can comfortably pass affordability checks but have limited spare capacity to absorb a prolonged loss of income.
Royal London research found that more than a third of employees fell into the ‘financially fragile’ category. Nearly one in five UK adults says they could cover bills and living costs for one month or less if illness meant they or their partner could no longer work.
Millions of people remain far more financially exposed than they realise, with limited resilience to absorb a prolonged financial shock
A significant proportion of people are working, earning, paying a mortgage and appearing financially secure on the surface. Many of them still have very limited capacity to absorb a prolonged loss of income.
Financial resilience is often associated with savings, income or financial security. The reality is that employment alone is no guarantee of resilience. Neither is income.
A family with a big mortgage and two professional salaries may have little capacity once commitments are met. Meanwhile, a self-employed client with irregular earnings may have built substantial cash reserves and be far more resilient than appearances suggest.
Interestingly, many of the solutions highlighted by the FCA rely on exactly the conversations that advisers are already having. The report specifically references protection prompts at key life events, including property purchase. It highlights situations where advisers encourage clients to think about how mortgage commitments would be maintained following illness, death or loss of income.
The concern isn’t just whether somebody owns a policy. It is whether their finances can survive when life stops going to plan
The mortgage process remains one of the few moments when clients are actively engaged with their finances. They are discussing future plans, dependants, income and long-term commitments. They are making decisions that could affect them for decades. If advisers cannot discuss financial resilience at that point, it is difficult to identify when a better opportunity might arise.
A conversation about financial resilience is unlikely to end with a single policy recommendation. Different households face different risks. Some need protection against death. Others are far more exposed to the loss of an income through illness or injury. Many need a combination of solutions working together. The best outcomes tend to come from planning that reflects how real households actually live rather than treating protection as a standalone transaction.
Mortgage advisers can spot exposure to financial shocks
The FCA’s report and the Financial Resilience Report approached the issue from different directions but, interestingly, arrived at the same conclusion. Too many households remain exposed to financial shocks they are not equipped to absorb.
Mortgage advisers are in a unique position to identify that exposure, challenge assumptions and help clients build greater financial resilience before a claim is ever needed.
Gregor Sked is senior protection technical manager at Royal London
This article featured in the October 2026 edition of Mortgage Strategy.
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