Advisers need to tread “very carefully” where customers are considering cancelling private medical insurance (PMI) or protection cover as cost of living pressures mount, according to Branko Bjelobaba, principal at consultancy Branko.
He highlighted the risk of customers not being able to secure the same terms if they later wanted to renew their cover as a particular concern given regulatory action.
Bjelobaba (pictured) issued the warning in the wake of the latest Financial Conduct Authority (FCA) statement protecting consumers in financial distress.
Earlier this month the FCA extended measures introduced during the Covid-19 pandemic to now support all insurance customers in financial difficulty whatever the reason last week.
The regulator said it was aiming to reduce the impact of the financial difficulty experienced on the customer, enable the customer to maintain an appropriate level of insurance that they can afford, and reduce the risk of the customer losing appropriate insurance cover that is important to them.
Speaking to Health & Protection, Bjelobaba described the regulator’s action as “sensible”, but added that as PMI and protection cover were discretionary purchases, they could be the first things customers sought to get rid of as cost of living pressures mounted.
But he warned this could be a poor choice with significant unintended consequences given the longer-term implications and so advisers needed to be very clear in their conversations.
“It is not a good idea as you may not be able to get back on the same terms or cost, so advisers need to think very carefully regarding the advice they give to their clients,” Bjelobaba continued.
“It is a new risk – with terms issued as at that date, so if they’ve had claims or such and are more impaired, they will be paying more.”