How to place value on protection in tough times
It’s inevitable that during the current cost of living crisis, people will be keeping a watchful eye on their budgets - making savings where they can, so they can still afford the things that are important to them.
In fact, our most recent cost-of-living research report explores the changes people are making to help with the crisis. When we asked UK adults about changes they’d made to their spending habits to pay for the cost of living, 87% of women and 82% of men said they’d made changes – with 25% of women and 16% of men confirming they’d reduced or stopped paying into savings. *
But with almost a fifth (17%) of people saying that they could only fund an unexpected expense of up to £100 from either their income or savings, this report also highlights the need to think about arranging a financial safety net. *
So, while the need for protection is as great as ever, clients may be put off - at least in the short term - by the thought of paying for something they may not use for many years, if ever. And clients with protection in place may be taking a closer look at their monthly direct debits to see if there are any outgoings they can cut back on.
We all appreciate it could be disastrous for a client if they decide to go against your advice, or cancel a policy, only to have something dreadful happen to them or their family.
So, how can we help clients appreciate the value of protection, especially in tough financial times like these?
I think the first thing, for existing clients, is to remind them of exactly how the policy will help if they need to make a claim. Often a plan will have been taken out to protect their home, their family, or their lifestyle, and I doubt that this need will have changed at all. In fact, in times of adversity clients may feel more vulnerable. So, reminding them of exactly how this policy can help protect them financially, will often be enough to help them recognise the importance and keep their cover in place
And when you talk to clients about taking out cover to protect their lifestyle - what does this mean now? Some clients may still want to ensure that if anything happens to them, their family will have enough of a financial cushion to be able to do things like maintain hobbies, go on holiday and have regular days and meals out. Others, who find monthly budgets getting tighter, might want to make sure their family’s most important needs can be covered, like paying their rent or mortgage and regular bills.
Of course, our menu plans offer your clients the ability to reduce cover or cut back on certain elements. And while this should ideally be avoided, keeping some cover is certainly a better option than cancelling a plan in full if budgets or priorities have changed.
Many clients will not appreciate the cost associated with cancelling their cover. So, talk to your clients about how their premium may increase with age and health issues - so taking out a cover in years to come may turn out to be very expensive or it may not even be possible if clients have suffered any serious health issues.
So, how do we engage clients with protection plans if budgets are tighter?
I’m sure most advisers will talk about the risk of premature death and sickness (either a critical illness, or a long-term illness or injury that requires time off work), but often it can be difficult to show clients the probability of these outcomes. So, for new and existing clients, perhaps run a personalised risk report to highlight their own chances of getting a critical illness or being off work for two months or more. And it’s likely that these risks are now even higher for existing clients than when they first took out their plan.
And on the flip-side - clients whose premiums were rated, such as smokers, those with a high BMI, or with a dangerous job, will have the option to review the terms of their plan. If they've improved or negated their health issues or changed their job or lifestyle, there might be an opportunity to decrease their monthly payment.
These days a lot of products and services available in the financial sector offer some form of tangible aspect, from being able to log into your current account online, to viewing the value of your pension on a mobile app.
Helping clients to see their protection policy might help them engage with what they're paying for. Our new customer portal, My Royal London, means clients have access to their policy details online at any time, and they can make changes such as updating their address details.
Plus, many providers, including Royal London, offer access to some form of additional support services that can provide tangible benefits even if there’s no claim. For example, we offer clients, and their partner and children, access to personal support from dedicated nurses who can refer them on to receive additional therapies, or for a second medical opinion. And clients can also get independent advice from legal and career helplines.
Letting clients know their plan includes services that can add value to their lives, at no additional cost, might make a difference in their decision to go ahead with protection.
*Source: Cost of living: a report on how the UK is coping with rising bills, Sarah Pennells, Consumer Finance Specialist, Royal London, Published 26 September 2022.