Nearly one-fifth of advisers have reported being contacted by clients about reducing or cancelling their protection policies as a result of the cost of living crisis.
Research released by Guardian Financial Services found that of the 701 financial advisers surveyed about the current economic climate, 18 per cent had been contacted by clients wishing to reduce their cover.
62 per cent of respondents said they were actively reviewing their clients’ outgoings due to the rising cost-of-living but only 30 per cent said they had a strategy to convince existing clients not to cancel or reduce their premiums.
The cost-of-living ranked as the number one concern for clients among the advisers surveyed, while rising mortgage interest rates came in second.
What is your clients’ top concern this autumn?
Cost-of-living | 58% |
Rising mortgage interest rates | 23% |
Covid-19 | 7.5% |
Inflation eroding the value of their assets | 5.5% |
Being diagnosed with a critical illness | 3.5% |
Losing their income | 3% |
*figures are rounded to the nearest 0.5%. Source: Guardian
Guardian’s marketing and proposition director Jacqui Gillies said it was the industry’s job to get clients the cover they need and to keep them protected.
“This is more important than ever in uncertain times, when there are so many different areas of financial challenge happening simultaneously,” Gillies said.
“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,” Gillies added.
In Gillies' view, this complexity was highlighted in the research, which indicated there is no single agreed direction advisers think protection will head in.
“Different clients will each be navigating their own individual financial circumstances in this new economic context", Gillies said, adding that now was not the time to shrink away from protection conversations.
Retention strategies
While 47 per cent of advisers said they did not have a retention strategy in place to deal with clients who wanted to cancel or reduce their cover, many did share their general response to such clients.
Some of the most common talking points used when convincing clients not to reduce their protection cover included:
- It could cost them more if they cancel now and take out a new policy in the future (66%)
- It leaves them and their family unprotected (60%)
- Protection can make sure you can pay your mortgage if things go wrong (57%)
- There’s other discretionary spend and even insurance options (e.g. phone insurance) which can be cancelled first (52%)
- Cancelling protection can undermine a carefully constructed financial plan (34%)
- A time of high prices isn’t when to cancel protection (33%)
- Inflation is only likely to be a temporary problem (18%)
jane.matthews@ft.com
