Matthews' plan to cut £2.3trn protection gap

Incorporating life cover with Personal Accounts would cut an estimated £2.3trn protection gap by 20% in one fell swoop, Friends Provident CEO Trevor Matthews says.

In a keynote speech at the annual Protection Review Conference, Matthews says a model based on the Australian superannuation fund would thrive in the UK.

Matthews says in Australia, employers pay $1 a week per employee for life cover, calling it a "cheap way of providing life cover on a falling scale". Cover starts at $60,000 for younger staff, he says, and reduces to $20,000 as staff get older.

"An initiative like this could reduce the life protection gap by 20% with one piece of legislative change," Matthews says.

"It's simple and we know it works. If Yvette Cooper, Secretary of State for Work and Pensions wants a quick win, here it is on a plate."

Matthews also says the FSA should not extend the RDR to embrace protection, branding the two "like chalk and cheese".

The FSA says a clear read-across of the RDR is unlikely but yesterday said it has concerns IFAs may see a commercial incentive to shift their sales to pure protection products to maintain commission income.

Its comments may worry some advisers the FSA will step up regulation of the protection arena unnecessarily.

"With investment products the future outcome is uncertain," Matthews says. "I believe clients need professional advice to help them determine their strategies, select appropriate products and investments and then manage their portfolios on an ongoing basis.

"Protection is very different and much more straightforward. Again professional advice is helpful but you can see what you will get - pay a certain price and then if the insured event occurs receive a certain benefit.

"Prices are explicit and kept in line by the extreme competitiveness of the marketplace. The government has enough on its hands without trying to solve a problem that doesn't exist."