Whether it’s the price of fuel at the pumps reaching record levels1 or the fact we’re seeing inflation reach a 30-year high2, there’s no denying that UK household finances are being stretched beyond levels many will ever have seen in their lifetime. And with nine out of ten people planning on making changes to pay for the increases in their cost of living3, what can we do to ensure that protection policies don’t become one of these changes?
It’s unfortunately a challenge that many advisers I’ve spoken to in recent months face when times are tough. Clients who are looking at easy ways to cut down their monthly expenditure often turn to insurance policies. After all, it’s not tangible, and they’ve possibly forgotten what they’re paying for.
So, what can you do if clients are looking to cancel their policy or if you’re finding it more difficult to discuss protection with prospective clients?
1. Remind them why they took out the policy
It might have been a few months since you spoke with them about protection so those reasons why they saw the benefit could be a distant memory. Could a gentle reminder of what their policy covers them for ease any concerns about where their monthly direct debit is going?
It doesn’t matter if they took out mortgage protection, income protection, critical illness cover or even family income benefit. You had the discussion to make sure they could either repay their debts or maintain their standard of living if an unexpected life event occurred. While money might be more of a concern at the moment, has the need to repay debts or maintain their lifestyle changed? Have the risks that they face changed?
2. Reinforce the value of their policy
I mentioned earlier about tangibility, a hurdle our industry has frequently faced since conception. How do you engage clients with something which is generally an unpleasant conversation to have, but is also not something you can see or touch?
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. But with protection, aside from the ongoing reviews and support from their adviser, there’s little ongoing communication to remind clients of the valuable cover they have.
So, if you asked your clients what do they consider to be the value of having a protection policy? They might say it’s the peace of mind knowing that if they’re off work sick or become seriously ill, then they’ll receive a sum of money to help them and their family. But is that always going to be enough when times are tough?
Collaborating with the rising cost of living is the fallout from the pandemic. And many would suggest the long-term ramifications from the virus and government measures haven’t even scratched the surface yet. I came across an article that suggested the official waiting list for NHS mental health care in England was standing at 1.6 million people - within that number was 374,000 under-18s4. Even getting an appointment with your GP is still, for many, an uphill battle with average waiting times for non-urgent face-to-face appointments sitting at around 9 days5.
The good news is most providers nowadays offer access to some form of additional support services that can offer some assistance, such as mental wellbeing apps, 24/7 virtual GPs, dedicated nurses who can refer clients to treatments and therapies that dovetail what’s being received from the NHS, and even legal and recruitment services. Some providers even allow clients to access these services without needing to make a claim and extend the services out to the partner and children of the person covered.
Reminding clients that they have access to these valuable services, often at no cost, might be the difference between cancelling a policy and keeping it in place.
3. Talk about future-proofing
We’re all seeing the effects of inflation right before our eyes. Going back to Royal London’s cost of living study, respondents said that rising energy bills, weekly grocery shops and phone and broadband costs top the list of concerns UK adults are facing at the moment3.
This could be a good way to steer your client conversations towards talking about income protection. How would a client pay for these necessities if they were off work sick? And with the added burden of inflation, do they run the risk of having to make even more cutbacks if they had to take an extended period of time off work sick?
When it comes to future-proofing cover like income protection, consider adding indexation to the policy. This allows clients to maintain the real value of their protection over time. So, if a claim needs to be made in the future the value of the benefit will better reflect their standard of living at that time.
4. Consider a lifestyle review to help with affordability
It could be worth looking at whether a provider would consider a lifestyle review? If a client has made a change to their lifestyle, occupation, or recreational activities that you consider reduces their chance of claim, some providers may be able to review the terms of the policy which could result in a reduction in their premium.
5. Discuss the long-term implications of cancelling
The most significant implication of cancelling the policy is how would clients be able to pay off their mortgage or maintain the standard of living they’re used to if the worst happened? But also, cancelling their policy now could mean an increased cost of taking out a new plan in the future. Why not remind clients that the cost of applying for policies like life cover, critical illness cover or income protection will generally increase with age.
Have a look at the range of tools and resources we offer to help you have successful protection conversations with your clients and build better financial resilience.
*9 in 10 adults make stark spending decisions as cost of living anxiety runs high, Royal London Cost of Living Survey by Opinium for Royal London, March 2022
1 - Diesel rises again to hit a record £1.76 a litre, BBC, March 2022
2 - As inflation hits 30-year high, UK households start to buckle, Reuters, February 2022
3 - 9 in 10 adults make stark spending decisions as cost of living anxiety runs high, Royal London Cost of Living Survey by Opinium for Royal London, March 2022
4 - Strain on mental health care leaves 8m without help says NHS leaders, The Guardian, August 2021
5 – GP appointment waiting times cut by around half since before COVID, Pulse, August 2021