Protection as costs of living rise: A question of affordability and value?

As people look to manage their finances, it is vital they make informed decisions when cutting back on essentials, and that includes protection insurance.

According to our Challenging Times report², 4% of people are already cancelling protection policies to save money, whilst 53% said affordability was the main reason for not purchasing an insurance product. Yet, with COVID-19 cases predicted to spike[3] in the winter and cost-of-living increases making it easier to fall into debt without a steady income, clients may be cutting away a safety net they may soon need.

So how can advisers frame the real-life value of protection so clients can make an informed decision against their concerns over affordability?

Framing the conversation

Protection conversations should be about providing peace of mind, and reassuring clients that the policies they are taking out will let them sleep easier.

Here, leading with claims data that is publicly available from providers can paint a picture for clients, showing them the common reasons for a claim and the rates of successful claims. This allows them to make a personal connection between the need for insurance and their health and wellbeing.

At The Exeter, we paid out on 93% of income protection claims received from members in 2021, totalling £10.5 million in benefits. Most other providers also announce their claims data each year, meaning advisers can show their clients that protection really does help hundreds of thousands of people across the country.

Lifelong support

While claims figures help to establish the value of a product, when building trust with clients, advisers will also find it useful to explore the potential long-term value of policies. For example, short-term claim periods on income protection policies are useful options that help with affordability but explaining the potential for the product to offer value in the long term – in the unfortunate event it’s needed – can be incredibly powerful.

Protection products have the potential to support claimants over many years. Our longest-running income protection claim has been in payment for over 25 years – such financial support could become integral to a claimant’s life, with the potential for benefits to be paid from their initial diagnosis up to retirement age.

Value that’s harder to put a number on

When determining the value of a protection product, it’s important for clients to look beyond the amount of benefit they are covered for. Many insurance providers now offer added benefits with policies to help consumers manage their financial, mental, and physical wellbeing.

For instance, access to a remote GP or physiotherapy consultations can be a substantial benefit to clients, especially as the National Health Service deals with ever-increasing waiting periods.

These benefits offer more than just financial value and should be a core consideration when a client questions the value or affordability of a product. They also represent a commitment from providers to increase a client’s quality of life.

When financial fears prompt clients into cutting back expenses, there are sometimes occasions where cancelling a protection policy may be necessary. However, this can’t be a decision made in isolation, and framing client conversations around the value of cover could be beneficial in the longer term.

When it comes to cutting costs, it’s important that clients make value judgements on what they need and don’t need – especially when it comes to insurance. Yet without awareness of the long-term value of protection policies, can they really make an informed decision?

This article was originally published in Best Advice on 16/10/2022.

1 ONS: What actions are people taking because of the rising cost of living?
2 Challenging Times: the health and financial fears of UK workers
3 i News: New Omicron Covid variant could be three times more likely to put you in hospital than previous strain