Head of Protection Distribution
Our recent research, ‘Challenging Times: The Health and Financial Fears of UK Workers’, asked the working population to reflect on the pressures affecting their financial and health security in the current cost of living crisis. One of the most startling findings showed that almost 40% of adults save less than £100 a month, with one in seven saving nothing.
This is vitally important for advisers to know, especially when it comes to client conversations. If a client is already finding it difficult to afford basic essentials, then a new or existing protection policy may seem like a luxury. As such, advisers need to provide tailored and personal support to ensure clients are aware of the full range of products available on the market and that going without a policy is a risk they cannot afford.
So, how can advisers ensure they continue to deliver value to their clients?
Understanding the landscape
With consumer price inflation rising to 11.1% in the 12 months to October 2022 and energy prices doubling at home, it is understandable that people are prioritising essential spending over saving1. Indeed, monthly spending on essentials alone increased by £145 in 20222.
This has significantly affected peoples’ behaviour with 81% of the working population altering their spending habits because of recent rises in living costs, according to our research. Half of people (49%) said they are spending less on the weekly shop, while 44% are reducing their utility usage and 41% are spending less on leisure and entertainment.
And for good reason; 52% of the UK workers we surveyed were concerned about being able to pay for food or utility bills and 44% were worried about being able to afford rent or mortgage payments.
This is something that advisers may consider when speaking to clients. If they are considering cancelling a protection policy to free up cash, that is their decision to make. But advisers play an important role in ensuring clients understand the impact of doing so, and the alternative options they have open to them.
For example, many protection providers will allow policyholders to reduce their monthly premiums by reducing their cover amount or extending their deferred period, offering continued protection while helping to reduce the cost.
Advisers should also consider using the range of tools available to help highlight the value of protection. For instance, income calculators can help clients conduct a financial MOT to help them measure their outgoings and make informed decisions when adjusting their policies.
Equally, highlighting the value of additional services, such as remote GP services and mental health support, can be another way for advisers to showcase the benefits of protection, even during the cost of living crisis.
Spotting low financial resilience
The cost of living crisis has strongly impacted societal saving habits, however certain individuals are more vulnerable to its effects than others.
For example, older age groups need to save more as they get closer to retirement but lack the same options available to younger generations to secure higher incomes. 20% of those aged 45-54 and 19% aged 55-64 reported that they saved nothing at all, the highest proportion of any demographic, making them vulnerable to financial shocks.
Other demographics we might consider as being vulnerable include those from certain regions. Respondents to our survey in London were most likely to save more than £100 in a typical month (80%) but only 53% of respondents in Yorkshire and 55% in East England said they save the same amount.
Understanding and assessing the vulnerability of clients will ensure that they are provided with the best possible recommendations to meet their needs. This will become even more important in the months to come, not only because of the ongoing cost of living crisis but also as the industry prepares for the FCA’s Consumer Duty requirements.
An adviser’s foremost concern is to ensure their clients receive the most comprehensive and personalised service possible. This is especially true during a time of profound economic hardship.
Keeping informed about the UK working population’s general health and financial concerns will help achieve this. It does not matter whether an adviser is reassuring an anxious client, considering vulnerability, or helping a client adapt to new costs. Advisers are key in helping clients understand the full value of a policy and the options available to them before making a major financial decision.
In doing so, they will ensure they are delivering a truly personalised and high-quality service.