Almost half (43%) of Britons do not buy life insurance because they do not see the need for it, research suggests.
Likewise 40% believe the same of income protection (IP), according to research by Swiss Re from over 1,000 consumers.
The findings point to an increasing "perception gap" between people's idea of their financial security and their actual circumstances, say authors of The Insurance Report, The Cost of Doing Nothing.
"A growing number of people believe they are financially self-reliant, and yet clearly they are not," says Ian Etheridge, Swiss Re's head of account management UK and Ireland.
"We call this the 'perception gap' and yet we as an industry are not doing enough to correct these false perceptions, nor are we adequately explaining what we can do to help."
To narrow this gap the industry must engage better with consumers by getting rid of the complex terminology surrounding products and services, he says.
"Let's take income protection. Even the product name fails to meet the basic "does what it says on the tin" test. When we explained to consumers that we were not talking about PPI, their eyes suddenly lit up as they recognised the value of income protection cover in its own right."
However while many consumers find savings and protection products confusing, 16% of respondents said they would definitely not take advice prior to purchasing.
Of those who would seek financial advice before buying a savings or investment product (65%), only 55% said that they were prepared to pay for it.
Among this group the research suggests a clear preference for a one-off, up-front payment, with only 13% preferring an hourly rate.
Respondents found it hard to quantify an hourly rate, with 43% responding "don't know", but 49% suggested an hourly rate below £75 for advice.
With consumers only willing to pay modest sums for advice, the report recommends a remuneration model based on product deductions as the best fit for the mass market.
However it says advisers need to be clear about the value their advice can bring: "If they cannot achieve this, market forces will likely lead to a contraction in the advice market, for all but the wealthy," it says.
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