Soaring inflation reaching its highest point for 30 years is straining finances across the country meaning many people are looking to cut outgoing wherever they can.
However, insurers have warned that dropping cover could be a false economy and leave families dangerously unprotected when they need it most.
Health & Protection spoke to insurers to find out how they are responding to the increased burden on customer finances, and how advisers can be supporting clients.
Inflation is up with the latest consumer prices index (CPI) data showing a 5.5% increase and the retail prices index (RPI), a 7.8% increase.
“With it, interest rates could be heading upwards and this is likely to put more pressure on peoples’ mortgage payments,” Nischal Singh, actuarial director at Guardian, told Health & Protection.
“Those who have savings may start utilising them, leaving less in the way of an emergency fund. Those without savings may need to cut back. Almost everyone will be looking at their non-essential monthly outgoings.”
But Singh says the sharp increase in the cost of living also means advisers need to talk with their clients about the value of protection.
“Far from being a discretionary spend item, protection – whether it’s income protection or protection against death and illness – becomes even more important when budgets are tight and finances are under pressure,” he continued.
But the good news is that insurers are responding to customer needs with a flexible approach as everyone contends with rising costs.
Insurers respond
LV= was the first insurer to offer premium holidays during the Covid lockdowns and last year told Helath & Protection it would make this a permanent feature, confirming the move last month.
The insurer added it offers budget income protection which comes with 12 and 24 month options to offer more flexibility to customers and earlier this year it launched a critical illness product focusing on core conditions to lower the cost of premiums compared to its comprehensive version.
Legal & General also offers customers who may need support 60-day grace periods or payment holidays.
In addition to three month contribution holidays as well, Zurich offers a self-service option for advisers to make instant changes to policies at any time so they can add or remove benefits, increase or decrease cover, extend the term of the plan, switch between variants and change mortgage rate.
AIG Life has extended access to its flexible premium option which was originally introduced during the pandemic to help customers, businesses and families who were concerned about how they are going to meet their bills
It enables customers to reduce the cost of their insurance – and the sum assured – for six months and stay insured. They can decide what level of cover they want to reduce to, provided it does not fall below the insurer’s minimum premium level. Customers can choose a higher premium level, to give themselves more cover, if they feel they can afford it.
Canada Life has promoted a suite of discounts through its insurance products which offer protection customers reductions on a range of every day products sold by supermarkets and retailers.
Guardian offers customers a mortgage guarantee – meaning their mortgage will be covered as interest rates rise. It also has an option available on all level covers to link the sum assured to the RPI, with an associated premium increase.
Devastating impact of not having protection
With all of this additional support, insurers hope customers will hold onto their cover, rather than risk a potentially more severe outcome.
Neil Davies, commercial director at AIG Life, told Health & Protection if customers lose their cover and something were to happen to them, the financial implications could be much worse for their families or businesses.
Justin Harper, propositions and marketing director at LV=, agreed, adding that not having protection in place could have a devastating impact on people with living costs only set to increase further in coming months.
“Being unable to work through illness or injury could have devastating effects on households, as they will continue to be financially squeezed by the effects of inflation,” Harper said.
“The LV= Wealth and Wellbeing Monitor highlights that consumers are feeling the effects of rises in the cost of living. The latest research revealed that 13 million people expect their finances to worsen over the next three months and 25 million say their outgoings have increased already,” he added.
