As interest rates rise again, those coming off fixed rate mortgages and looking down the barrel of a premium hike of hundreds of pounds and those facing the cost of living ‘heat or eat’ options, must be despairing. With families cutting out essentials, not to mention pension savings or luxuries to fund the cost of living, it is little surprise that financial and health protection insurances will be cut also.
In the six months to January 2023, 13% of adults or 6.2m people who had held insurance or protection policies in May 2022 cancelled at least one of their policies and/or reduced the level of cover on at least one of their policies specifically to save money due to the rising cost of living, according to the Financial Conduct Authority’s Financial Lives Survey. 23% of policies cancelled were life cover, 10% critical illness, 9% private medical insurance (PMI) and 5% health cash plans.
Protection has for ever been regarded as a bit of a luxury item – life insurance just about gets accepted but for income protection, PMI and critical illness insurance – advisers constantly struggle to get the message about the importance of such cover across at the best of times. Or if they do get the message across, persuading clients to take out policies (and pay for the premiums) is another hurdle too few manage to get over.
It shouldn’t take a crisis in the NHS to push the argument for PMI but it should help. But does it? For some, affordability might well be an issue. So, it behoves us to look to company supported PMI. Or to look to the much overlooked (as often considered the poor relation) health cash plans. Significantly cheaper, these still provide cover for many of the health services we all use at some point: dental and optical costs, physiotherapy. Employer sponsored health cash plans are a large chunk of the market, and could be considered a good investment in employee healthcare and maintenance.
Laing Buisson, the independent sector healthcare market data provider agrees that: ‘As we look to the future, the private health cover sector faces two contrasting drivers. On one hand, limited access to NHS dentistry and the growing wait times for NHS treatment continue to fuel the demand for private health cover. On the other hand, the decline in disposable household income, expected to persist into 2024 and beyond, acts as a counter-driver of demand for private health cover.’
Who knows what the answer is, but it calls for individuals and their advisers to find the best way possible to prioritise and secure what protection insurances they can for themselves and to review the level of cover they do have as soon as they are able to adjust to provide meaningful cover in the event of losing income or suffering poor health.
Thankfully providers are seeing the potential from obligations under the FCA’s new Consumer Duty standards to protect consumers and require firms to put customer needs first.
Siobhan Barrow, UK Distribution Director at Royal London said: “Protection insurance can be often overlooked but the Consumer Duty will change this, moving it from a more transactional sale to become a much more integral part of the holistic advice conversation.”
Stephanie Spicer is head of content at Quill PR