Almost a third (28 per cent) of UK adults who purchase over 50s life insurance cancel their policy, with £173m of life insurance lost in 2014, because 52,000 people cancelled, new data from Royal London has revealed.
In terms of premiums paid, collectively this represents £86m of customers’ wasted cash.
The firm commissioned YouGov to conduct a nationally representative survey of 1,164 UK over 50s to determine how many had cancelled their policy, followed by an online survey of 250 customers who had bought an over 50s life insurance policy, but subsequently cancelled their policy before it matured.
The findings indicate many customers who cancel their over 50s life cover are financially vulnerable; for example, a quarter who lapsed their policy have ‘no savings or investments’.
Although a third of customers chose to cancel their over 50s policy because they no longer ‘needed’ it anymore, a fifth of policy-holders said it was due to long-term money issues. Two in five people cancelled either because they could not afford their premiums or because they needed to prioritise other bills instead.
Jerry Toher, chief executive of Royal London’s consumer division, commented that the research shows how poorly designed products affect customers - especially those on low incomes - and confirms why the over 50s life cover market must change current practices.
“I want to see the market remodelled - from the way products are designed, to the customer journey and how this type of insurance meets people’s real needs.
The provider stated that the market place is crowded and can be confusing for consumers, while cancelling a policy is an all too quick and easy process, which drives profit for insurers.
Most policies also lack ‘safety’ features which customers need, with Royal London calling for a “major rethink” of product standards and cover designed for customer needs not maximum profit.
Mr Toher said his team is looking at ways to better serve customers facing financial hardship and urged other providers to respond and suggest ways to improve the market.
“A sea-change is within sight, but requires collaboration: commitment from providers, insight from consumer bodies on the frontline and support from impartial advice organisations.”
peter.walker@ft.com
