One in 10 people with a protection policy is considering either reducing or stopping their premiums as a result of the cost-of-living crisis, according to research from Royal London.
With prices rising by the highest rate in 40 years, consumers are looking for ways to slash costs to relieve the pressure on their pay packets. Existing financial commitments such as personal protection may be at risk when households are forced to prioritise urgent energy bills or other immediate living expenses.
Ensure consumers are aware of the risks of forgoing insurance protection
Advisers will need to engage in crucial conversations with clients to promote insurance products and reinforce the necessity of protecting oneself from potential financial shocks further down the road.
Fail to plan, plan to fail
Although the pandemic has exposed the value in planning for one’s financial future, spiralling inflation has eaten into savings — without which customers are more vulnerable to large-scale financial shocks than before.
It may be tempting for cash-strapped consumers to cut back on protection products, but insurance policies will be more vital than ever. For example, buildings and contents insurance are a crucial step to future-proofing homes and providing peace of mind in the unexpected event of damage caused by fire, floods, storms, theft and many more unexpected eventualities.
Networks will be essential for brokers looking to get comfortable with recognising and talking to financially vulnerable customers
Other crucial insurance products that brokers should highlight to clients include accidental damage cover, which will provide added protection for accidental damage of drains and pipes, windows, baths and toilets. Combined with contents insurance, customers will be covered for accidental damage to big-ticket items such as carpets, furniture and TVs.
Similarly, adding home emergency cover to clients’ policies will help fix electrical supply or mains heating system failures, and repairs to roof, plumbing or drainage systems.
Crucial time to seek advice
The increased necessity for protection products provides an excellent opportunity for brokers to renew their focus on client retention. Advisers should seek to empower consumers with the knowledge to holistically assess their circumstances to ensure they are aware of the risks of forgoing insurance protection, while finding a product that is the right fit.
Brokers now need to be more proactive than ever to secure the best consumer outcomes. Supporting financially vulnerable customers by engaging in constructive conversations will be key to helping them find the most appropriate and affordable insurance products that are best suited for their circumstances.
The cost-of-living crisis has exposed the necessity for consumers to be protected against future financial shocks
Similarly, brokers will play an increasingly significant role as they are able to tailor advice to a client’s specific circumstances in a way that aggregate sites cannot.
Although people may be attracted to aggregate sites by the promise of reduced prices, they could find themselves without sufficient protection due to incorrectly entered information, unclear add-ons or undervalued contents. On the other hand, advisers have the tools to ensure that clients’ needs are met and that they receive correct cover.
Tap in to a network
Networks will be essential for brokers looking to get comfortable with recognising and talking to financially vulnerable customers and to ensure they are achieving the best outcomes.
As increasing prices continue to put pressure on budgets, we expect there to be a stronger focus on these types of session. Networks can prepare brokers by engaging them with articles, webinars, events and training sessions, enabling them to provide flexible advice to meet customer requirements.
In the current bleak economic climate, many consumers are facing financial uncertainty. Those looking for general insurance will need a quick and efficient answer on which products are available and affordable.
Advisers will need to engage in crucial conversations with clients to promote insurance products
Ultimately, the cost-of-living crisis has exposed the necessity for consumers to be protected against future financial shocks.
This provides a strong opportunity for advisers to engage with and educate people on the benefits of protection insurance, and ensure they are well insulated against economic uncertainty.
Toni Smith is chief operating officer of Primis
This article featured in the June edition of MS.
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