The vast majority of advisers are not being approached by clients to cancel their protection cover or reduce premiums yet, but they are preparing for it.
However despite this situation, almost half of advisers did not have a strategy in place to support clients wanting to cancel cover or reduce premiums.
The survey of 701 advisers by Guardian found 82% had not seen clients actively contacting them to reduce their premiums or cancel their cover, however 18% admitted they were starting to be contacted.
Separately, 62% said they were actively reviewing their clients’ outgoings due to the rising cost of living – the remaining 38% said they were not.
Perhaps unsurprisingly, when asked to rank their clients’ top six concerns from a list of options, the cost of living ranked top (58%) followed by mortgage interest rate rises (23%).
Losing their income came next followed by being diagnosed with a critical illness, and while Covid-19 came bottom of the list 8% still ranked it as their clients’ number one worry.
When asked if there was still an increased appetite among clients to discuss protection due to the pandemic, 62% of intermediaries said yes.
Almost a quarter (24%) disagreed and thought there was not, and a minority of 14% said they did not believe that the pandemic had ever had an impact on client willingness to talk about protection.
When asked about whether they think the rising cost of living will reverse the trend of increased client willingness to talk about protection, over half (56%) of advisers thought it would. A third, disagreed, and thought the trend would continue.
Client retention strategies unclear
Turning to client retention, when faced with a client who is struggling with the rising cost of living and wants to review their protection policy, 44% of advisers said they would not recommend that a client cancels their cover.
However, 16% said they would consider reducing their cover to reduce premiums and 13% said they would explore changing their mix of covers if they had more than one policy.
An additional 8% said they would advise skipping inflation increases associated with their increasing policy, and just 3% said they would look to replace their existing cover with a cheaper type of policy.
When asked about client retention strategies, 30% of advisers said their firms has a strategy to convince existing clients not to cancel or reduce their premiums and that they had adapted it in line with the cost of living crisis.
One in four (23%) said they had a strategy but had not adapted it. However, 47% of advisers said they did not have a strategy at all to deal with clients wanting to cancel cover or reduce premiums.
Conversations about cancelling cover
Advisers were also asked about what they say to clients who are struggling financially and talking to them about reducing or cancelling cover. The range of talking points they used to convince clients not to cancel their 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 is 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 was only likely to be a temporary problem (18%).
Only 20% of the 162 advisers who answered said they would recommend clients pause their cover and monthly premiums if the provider offered this as an option. Most respondents said they would not recommend this (46%), while 34% were unsure.
When asked how difficult advisers were finding it to convince new clients of the need for protection, some said they found it either easy (21%) or very easy (2%), 47% were neutral and 28% said they found it difficult or very difficult (2%).
The messages advisers said resonated most with new clients were that they want peace of mind that their family is protected (31%), and that they want to make sure their mortgage or their biggest debt was covered (23%).
One in five said their clients still wanted the cheapest cover they can find and 17% said their clients wanted the best cover they can afford. Around 6% said their clients wanted the maximum amount of cover they can afford.
‘Good advice needed more than ever’
Jacqui Gillies, marketing and proposition director, Guardian, (pictured) said: “Our job, as an industry, is to get clients the protection they need and keep them protected.
“This is more important than ever in uncertain times, when there are so many different areas of financial challenge happening simultaneously. 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.
“This complexity is highlighted in our research, which indicates there is no one agreed direction in terms of how advisers think these economic challenges will play out for protection. Different clients will each be navigating their own individual financial circumstances in this new economic context.
“Advice firms will be looking at their own client base, business model, approach to protection, and processes, to understand how best to support their clients at this time. What’s clear is that it is certainly not a time to shrink away from protection conversations – clients need good advice now more than ever.”
