Advisers told to ‘save’ protection policies amid living squeeze

Advisers told to ‘save’ protection policies amid living squeeze
Source: Financial Times

Trade bodies have called on advisers to “save” their clients’ protection policies, wary many individuals may cancel their direct debits in the face of rising living costs and historic levels of inflation.

Advisers were told last week (April 14) they should “be proactive” in reaching out to their clients and remind them of the benefits of their protection policies.

In a joint statement, the Association of Mortgage Intermediaries, Protection Distributors Group and Income Protection Taskforce published guides on how to approach the conversation.

They build on guides published by the organisations in the wake of the Covid-19 pandemic two years ago, when protection policies were first vulnerable to mass cancellations.

“Now, with UK households facing the worst squeeze on incomes in a generation there is concern that some clients may cancel their protection insurance direct debits,” the trade bodies said.

“Advisers are well placed to engage and educate their clients about the benefits of their existing policies, as well as discussing alternative options to cancellation.”

UK inflation hit a new high of 7 per cent in March, having now surged ahead of the Bank of England’s 2 per cent target each month since May last year.

In light of this climate, Stacy Reeve, a senior policy adviser at AMI, said it was important to refresh the guide with updated hints and tips to help advisers have proactive conversations with their clients.

“The new consumer facing guide can be used by advisers to engage with their clients and prompt discussion about their cover. Crucially it encourages clients to speak to their adviser or insurer as soon as possible if they are struggling financially and need support.”

Protection industry bodies have campaigned for more awareness of protection among advisers, and for those not qualified in it to signpost clients to protection advisers.

AMI said the rate of mortgage brokers signposting clients to protection specialists rose by 11 percentage points last year.

Bodies such as the PGD and the IPTF have long advocated for brokers to become better at signposting their clients, in a bid to close the protection gap. That is, the gap between those who have a mortgage, and those who have taken out protection to insure their mortgage payments.