Cost of living crisis likely to impact interest in protection

The cost of living crisis and rising mortgage rates have been ranked as the top concerns for clients, according to advisers surveyed by Guardian between 11 August and 3 September 2022.

Related topics:  Protection,  insurance,  Cost of living
Warren Lewis
2nd November 2022
Cost of Living

Loss of income, being diagnosed with a critical illness, and the value of their assets diminishing due to rising inflation also ranked highly, with Covid-19 cited as the most significant concern among clients for just 8% of advisers.

Despite ongoing economic uncertainty, 82% of advisers said that they were not seeing clients actively seeking to cancel existing protection policies or reduce their premiums. However, the remaining 18% did state some clients had begun contacting them about this.

The impact on protection conversations

Guardian also surveyed advisers on retention, asking if there was still an increased client willingness to talk about protection as a result of the pandemic. According to the research, 62% of advisers said yes. 24% disagreed and thought there was not, and a minority of 14% said they didn’t believe that the pandemic had ever had an impact on client willingness to talk about protection.

When asked about whether they think the rising cost of living will reverse the trend of increased client willingness to talk about protection, 56% of advisers thought it would.

When speaking to clients that are struggling financially and are considering cancelling their cover, 66% of advisers say they advise it could cost them more if they cancel now and take out a new policy in the future, 60% advise that it leaves them and their family unprotected or protection can make sure clients can pay their mortgage if things go wrong (57%).

New clients

There were mixed results when advisers were asked how difficult they were finding it to convince new clients of the need for protection, with some saying they found it either ‘easy’ (21%) or ‘very easy’ (2%).

47% were ‘neutral’ and 28% said they found it ‘difficult’ or ‘very difficult’ (2%). When asked what is the biggest concern clients have about their protection needs, the messages advisers said resonated the most with new clients were that ‘they want peace of mind that their family is protected' (31%) and that they want to ‘make sure their mortgage/their biggest debt was covered’ (23%).

20% said their clients still wanted the ‘cheapest cover they can find’ and 17% said their clients wanted ‘the best cover they can afford’. 6% said their clients wanted the maximum amount of cover they can afford.

Jacqui Gillies, marketing and proposition director at Guardian, commented: “Our job, as an industry, is to get clients the protection they need and keep them protected. This is more important than ever in uncertain times when there are so many different areas of financial challenge happening simultaneously.

"Cost-of-living, mortgage interest rate rises and high energy prices, will each have varying degrees of impact for different clients. That’s on top of Covid-19 remaining a concern for a small proportion of people. For advisers, if that wasn’t enough, there’s the additional pressure rate rises and lenders withdrawing products puts on the mortgage application process; as well as the implications of the Consumer Duty regulation.

She concludes: “This complexity is highlighted in our research, which indicates there is no ‘one’ agreed direction in terms of how advisers think these economic challenges will play out for protection. Different clients will each be navigating their own individual financial circumstances in this new economic context.

"Advice firms will be looking at their own client base, business model, approach to protection, and processes, to understand how best to support their clients at this time. What’s clear is that it is certainly not a time to shrink away from protection conversations – clients need good advice now more than ever!”

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