Protection insurance planning could come under greater scrutiny from customers as a result of chancellor Rishi Sunak’s failure to properly address the country’s cost of living crisis, advisers have warned.
They also believe failing to promote the availability of private medical insurance (PMI) to take some burden from the NHS was a missed opportunity, but that the market is unlikely to be hit hard.
Among the measures announced by the chancellor yesterday in his Spring Statement was a cut in fuel duty of 5p and that the National Insurance Contribution (NIC) lower threshold will be increased by £3,000 in July to bring it into line with the Income Tax personal allowance lower limit.
But the Office for Budget Responsibility (OBR) forecast inflation could reach as high as 9% and has already forecast that this will lead to the greatest drop in household living standards in any single financial year since ONS records began.
It appears health and protection advisers do not think the chancellor’s measures have gone far enough to alleviate the country’s cost of living crisis, which they warn could lead to customers reassessing protection policies.
Stephen Ellis, associate director at Prosperis, said it is almost inevitable that when families look to tighten household expenditure that protection policies come under the spotlight.
“If people are forced to reassess outgoings, they may delay implementing or even cancel valuable protection benefits. The consequences of this are horrendous, creating poverty,” he said.
“As an industry we are striving to close the protection gap and being realistic the combination of pandemic and cost of living increases is likely to make that task a lot harder.
“Look at the benefit that insurance provided during the pandemic – and we must remember that has not gone away – and cancelling insurance now may be the worst decision ever.”
Golden opportunity missed for PMI
Touching on health insurance, Ellis accused the chancellor of missing a “golden opportunity” to encourage people to consider private provision and reduce the burden on the NHS.
“We are speaking to HR specialists who are concerned that people are leaving schemes as the P11D tax is an issue, meaning an increased burden on the NHS and a less healthy workforce,” he added.
Naomi Greatorex, managing director at Heath Protection Solutions, told Health & Protection that while changes to national insurance and fuel cuts were positive news, these changes have not gone far enough to make a real difference.
“The cost of fuel has been rising at such a rate, that the 5p per litre cut will be a drop in the ocean for many, struggling with soaring fuel bills,” she said.
“The increase to the household support fund sounds like a huge number, but a large amount of low income families that are really struggling with energy bills and such will not qualify to access this.
“Financial hardship, and concerns over increased spending will mean that consumers are increasingly concerned about committing themselves to additional monthly spending. Protection planning will be impacted because of this.”
Enquiries rising, not falling
And according to Isaac Feiner, owner of Lifepoint Healthcare, for the private healthcare market the current situation is unlikely to have a significant impact given its typical customer base.
“From a private health insurance perspective, I think the people who want private healthcare to alleviate their concerns about NHS waiting times and have peace of mind will always find a way to make that happen and take out a relevant plan to suit their needs and budget,” he said.
“We have not seen a drop in enquiries as a result of the pandemic and now the global economic situation, rather we have seen an uptick. Overall I don’t think it will influence things much either way.”
