Protection  

How protection advisers can help those struggling with the cost of living 

  • Describe some of the ways providers are helping people who find it challenging to pay protection premiums
  • Explain the difference between career and sabbatical breaks
  • Identify the drawbacks of premium deferrals
CPD
Approx.30min
How protection advisers can help those struggling with the cost of living 
(Christopher Furlong/Getty Images)

Some protection is better than no protection.

And despite what is stated in official insurer documentation, support is usually available if a client is struggling financially and it looks likely that they are considering ditching their cover. 

“You might be surprised at the level of support insurers can offer, from temporarily reducing cover to payment holidays to spreading payments,” says Ian Sawyer, commercial director at Assured Futures, adding: “It differs between insurers, and sometimes you have to ask, so please get talking to your insurer and adviser.”

At one end of the inflationary scale, personal investment levels are at a three-year low, according to research from Scottish Friendly, while at the other end the cost of a cheeseburger at McDonalds has risen for the first time in 14 years.

Rising prices are impacting all of us, and in this CPD column we investigate what typical help from an insurer looks like, on both a contractual and non-contractual basis, and how to best support clients who may be facing financial difficulties.

First, a look at the current – and potential future – extent of the current economic downturn.

Tough times

According to the British Chambers of Commerce's latest economic forecast, quarterly economic growth is expected to “grind to a halt this year before dipping briefly into negative territory as global events continue to weigh heavily on the UK economy”. 

At the time of writing, inflation stood at 8.2 per cent, according to data from the Office for National Statistics. The BCC expects the UK inflation rate to reach 10 per cent in Q4 2022, far outpacing average earnings growth of 5 per cent, and leading to the current high squeeze on household incomes that most are feeling right now.

The protection industry experts we spoke with for the purposes of this column also expect the situation to get worse, in the short-term at least.

Paul Yates, product strategy director at iPipeline, says: “With continued pressure on prices of goods bought and sold by UK manufacturers, especially food, rate rises and October’s energy price cap review, this all heightens the importance of each and every adviser’s job. People need professional, experienced advice now more than ever.”

What help is available?

There are two aspects to the help available, according to Adam Higgs, head of research at Protection Guru.

Firstly, there is the support that insurers offer on a contractual basis, such as:

Career breaks 

This involves a temporary pause in both the cover and premiums, for anything between six months to two years. Most providers do not expect clients to repay premiums at the end of a career break.

Although it is called a career break, generally insurers do not insist that the client must have stopped working to exercise this option. This option is mainly offered by the friendly societies. Some insurers have something similar, but it tends to be more of a premium reduction option than a full pause of the policy, explains Higgs.