Advisers remain bullish about business prospects for 2024 despite an increase in the rate of inflation.
At the end of last year advisers told Health & Protection they were optimistic about prospects for 2024 as the Office for National Statistics (ONS) revealed Consumer Prices Index Inflation plunged to 3.9% in November from 4.6% in October.
But despite inflation ticking back up to 4% in December, advisers remain relatively confident about prospects for business this year.
Katy Davies, specialist protection adviser at Henry Dannell, told Health & Protection such fluctuations in inflation are to be expected, adding she is hopeful 2024 will prove to be a more stable year in the protection world.
“There are bound to be fluctuations and in the grand scheme of the financial climate currently I don’t deem this to be too detrimental,” Davies said.
“Last year felt full of unpredictability – 2024 feels more stable and hopefully positive in the financial world.
“This is reflected in the protection world – it is counter intuitive to pay for a policy when costs are tight, but this makes policies like income protection and CIC even more valuable at a time where a clients income could be eradicated completely if unwell or unable to work.
“Clients understanding this is vital and it is our job to portray the benefits.”
Davies added she was hopeful this year would see the cost of living proving less of a barrier to customers taking out cover.
“There will always be a barrier if a client doesn’t understand the benefits or purpose,” she continued.
“Educating clients in times of erratic financial climates is vital and the same applies in stable climates. Paying a monthly protection premium could be a small cost in comparison to being left without an income, an emergency fund or mortgage protection.”
Alan Lakey, director at Highclere Finanical Services, added so far this year sentiment has been positive with mortgage rates tumbling and house prices edging up.
“I’ve not come across any negativity thus far and unless something extraordinary occurs I believe this will be a better business year than last,” Lakey continued.
“Of course, with UK and US elections and two wars being fought, who can be certain of anything.”
Emma Wood, director of healthcare at Broadway Insurance, told Health & Protection while private medical insurance (PMI) customers are currently conscious of their disposable income, they are also aware of the implications of not being able to access healthcare quickly should they need to, and the impact this would have on their ability to work.
“Conversations can be focussed around cost effective ways to have PMI that perhaps help towards larger costs such as surgery or treatment to keep premiums low and then self-funding initial consultations and diagnostic tests.
“This allows members peace of mind that they would have access to timely surgery and treatment to enable them to get back to work quicker.
“At Broadway we always focus on our client’s requirements and take things back to the beginning, so to speak,” Wood continued.
“We don’t just assume that any cover they have in place already is what they really need. We sit down with our clients to fully understand their requirements and look for a solution and options for them to consider and make an informed decision as to what is right for them.”
Wood added she expects cost of living and long waits for NHS treatment to remain twin concerns among customers this year.
“I think clients will continue to be mindful of their outgoings whilst also being conscious of the importance of PMI while the NHS waiting lists and delays in access to primary care remain as they are,” she concluded.
Andy Walton, protection proposition director, Mortgage Advice Bureau, (pictured) warned the rise in inflation when the market was expecting a slight fall may delay the first base rate cut of the year from the Bank of England.
“With this in mind, we hope that today’s increase won’t be the start of an upward trend,” Walton told Health & Protection.
“We’ve seen mortgage rates fall over recent months, and with fuel prices (especially petrol/diesel) also falling, the pressure of the cost of living crisis may be easing.
“The question is: does the cost of living crisis impact customers’ willingness to buy protection, buy less protection, or stop paying for their current protection?”
Walton revealed that amid a peak in the cost of living crisis in 2023, MAB actually saw customers’ willingness to spend on protection improve.
“The average customer spent 7% more on protection in 2023 compared with 2022, with an average spend of just over £65 per month,” he continued. “MAB also saw persistence improve in 2023, which, again, might be surprising given the cost of living crisis.
“So, why would this be the case?
“It could be that as customers’ savings are eroded due to the cost of living crisis, they look more to insurance to help them get out of a financial difficulty.
“In reality, most people’s savings would not cover them for long enough anyway, but seeing savings reduce might increase their reliance on protection.”
Isaac Feiner, managing director at Lifepoint Healthcare, told Health & Protection he was “unconcerned” by today’s development.
“Our clients generally understand that PMI is important and ensure they allocate their resources to pay for this accordingly,” Feiner said. “We tend not to be asked for virgin PMI by those citing cost of living issues but we have found that renewal costs have increased overall by 20-30% leading to clients to have to make some decisions on their plans they may not have had to think about previously.”
Though Feiner added customers do understand costs overall have gone up and so insurers must increase premiums to keep things sustainable and as stable as possible.
“We seek to educate the clients and help them understand the rationale for the increases and this goes a long way,” he continued. “Giving clear rationale is important, I remain unconcerned.”
Joanna Streames, owner of Velvet Mortgage and Insure Services, told Health & Protection while today’s increase did not concern her, perception among the general public was a worry.
“I think we have started to feel that things are going in the right direction,” Streames said. “The headlines have been that mortgage rates are coming down, energy prices have improved so this unexpected rise can worry people.
“People are still worried and I think we’re just starting to feel relief and start moving in the right direction. This could set that mindset back a little but time will tell. A lot will depend on how it is reported in mainstream news.”
But Streames expressed hope that this latest increase would prove to be “just a blip” and customers will secure better mortgage rates and this will have a positive knock on effect to people properly protecting themselves.
As for future prospects, Streames maintained this would depend a lot on where mortgage rates go.
“If things remain as they are, and hopefully lenders have factored in some movement in inflation already, then it will be an improvement on last year,” she added. “It takes time generally for people, in my experience, to feel more positive even when financial matters such as mortgage and living costs have improved.”
David Hollingworth, associate director, communications at London & Country Mortgages, said the size of this latest increase should not send money markets into shock but warned it could apply the brakes to mortgage rate cuts.
“That will no doubt have a big part to play in how open customers will be to reviewing their protection needs and the need for cover,” he continued. “The improved mortgage rates will ease that challenge and the hope will be that customers are feeling a little more optimistic as the year goes on, especially if the Bank does start to cut interest rates.
“Today’s figures shouldn’t be enough to instil panic but does underline that there’s still uncertainty. Although the outlook is more positive that uncertainty is bound to still be at the front of customers’ minds. Advisers will need to keep working hard to impress on customers that taking and/or keeping protection policies remains a necessity.”