BrexitDec 13 2018

How ASU can help protect clients against Brexit uncertainty

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How ASU can help protect clients against Brexit uncertainty

Brexit deals have been struck, signed and fundamentally disagreed with by some senior policymakers and Prime Minister Theresa May has been tested in a confidence vote. 

As a result, sterling has slid, the government of the UK is on shaky ground and the scare stories about medicine shortages and house price drops are still circulating.

In such an environment of noise and speculation, it is not unnatural for many people to want to take steps against every possibility. 

So, if clients are concerned about a weak economy post-Brexit, how helpful might an accident, sickness and unemployment policy be for clients? Moreover, what else could they be doing to protect themselves in the event of a weak jobs market, or potential recessionary environment?

Historically, uncertainty has led to more inquiries about insurance, protection specialists have claimed.

Dean Mason, director and founder at Masons Financial Planning, says ASU has typically seen a spike in sales whenever the UK economy has seemed to be shaky. 

In these uncertain times, ASU makes sense for everyone. Jason Berry

He says: “There is no doubt sales of this type of cover increase in times of recession and with economy and job worries in the air around Brexit we have been seeing an increase in enquiries for some time, if not in take-up as yet.

“Certainly individuals need to assess their position and the likelihood of finding a new job in this challenging environment and, as always, take bespoke advice from a protection professional.” 

But is Brexit really as big a concern as the headlines suggest?

Kesh Thukaram, a founding director of Best Insurance, believes so. “Brexit is definitely a major cause of concern,” he says. “Therefore, it would be prudent to insure against redundancy.”

He is not the only one concerned. Rob Harvey, adviser at Drewberry, agrees with Mr Mason that the number of enquiries for unemployment insurance always picks up when the economy takes a spill, and the insurance industry can expect to see a resurgence given the impending Brexit date of March 29 2019.

According to Mr Harvey: “Brexit will likely be one of the biggest shocks the UK economy has faced in some years, so enquiries are likely to rise concurrently.” 

Sectors at risk

Like Mr Mason, Mr Thukaram has seen more enquiries about protection policies since the UK voted to leave the European Union back in June 2016, and in the light of some very high-profile company closures. 

“There has been a surge in the number of people working in retail and financial services buying policies. Eighteen months ago, it was oil and gas, and government/public services.” 

If clients – or members of their families – are in certain occupations, it might behove them to consider taking out some financial protection just in case their sector becomes vulnerable to any economic downturn.

Steve Devine, chairman of the Protect Association, thinks Brexit has already contributed to increased sales in the long-term protection market, and agrees certain sectors appear to be more at risk, such as high-street casualties.

Mr Thukaram adds: “It is better to cover clients as soon as possible, because if there is sufficient information in the public domain, warning a particular business is at risk, such as we have seen with Debenhams, or employees have been made aware their jobs are being affected, they become ineligible to buy the policies.”

Establishing some savings to cover a short-term income loss is a prudent step that many people could take to protect themselves financially. Nick Homer

Jason Berry, director of sales at Uinsure, says: “In these uncertain times, ASU makes sense for everyone. However, it’s worth noting that if there is currently some speculation your job may be at risk – for example, if talk of potential redundancies has already begun at your place of employment – it is unlikely an insurer will pay out.”

Mr Harvey elaborates: “A key issue with unemployment insurance is that you can't take it out reactively – if you've been made aware of forthcoming redundancies or even rumours of approaching redundancies, you're unlikely to be able to make a successful claim on unemployment insurance, even if you take it out before you've been put out of work and otherwise meet all of the other conditions to make a claim.

"So the message would be to take it out as a preventative measure, although not at the expense of protecting your health or life with insurances such as income protection or life assurance.”

Other considerations

While protection is a key consideration, nothing can beat prudence: saving more, spending less and being diligent with your personal finances.

Nick Homer, head of market management, corporate risk, for Zurich, agrees: “Establishing some savings to cover a short-term income loss is a prudent step that many people could take to protect themselves financially.”

Mr Devine acknowledges people have been stung by state benefit system changes, such as Universal Credit, which has had the effect of making more people aware of the need to secure the financial wellbeing of themselves and their families, “via savings or whatever insurance protection they can afford”.

But according to Alan Lakey, founder of CI Expert, all the noise around Brexit should not detract from the reality – that the priority should be “health before redundancy”. 

He explains: “You can always find employment, but a serious illness or accident could mean a permanent inability to work.”

Zurich UK’s recent ‘Cost of Resilience’ report highlighted the need to encourage people to make better financial provision for themselves. It found: 

  • Some 60 per cent of UK adults said a financial shock would have a negative effect on their mental health. 
  • Some 83 per cent say they wake up at night worrying about their finances.
  • One in six admit they have no disposable income.
  • Some 24 per cent say they have no savings.
  • Nearly 90 per cent of people have no income protection cover.

Given these stark figures, it is important for government and the industry to help encourage people to make better financial provision, Brexit or no Brexit.

This is where advisers can also come into their own, helping clients to make the most of every single tax advantage – including the newly improved personal tax allowances announced in the October Budget – and invest wisely in case of that ‘rainy day’.