We’re in the middle of a cost of living crisis. Everything is more expensive, even traditionally lower cost essentials like electricity and gas. Food is at highs not seen since the 80’s and families across the UK are looking for ways to reduce regular outgoings.
In previous economic downturns insurance has been one of the things that many have seen as an unnecessary expenditure, limiting new protection sales as is not something to even consider, or allowing existing policies to lapse. Post pandemic research of our user base shows that while many are feeling the pinch, the majority say that their clients still see protection as necessary, with 62% of advisers indicating that their clients see Protection as an essential spend despite the impact inflation and rising costs are having.
Indeed our statistics show that while quote and new business numbers have remained broadly flat for the past two years, we have also seen some key areas of growth, with increases in cover levels for Life and Critical illness and more impressively, a 14% increase in Income Protection quotes and 6% in Income Protection applications.
Providers continue to prioritise product innovations that help consumers engage with protection products
Delving deeper into our data may explain this seeming disparity.
When comparing product features available on products across our services and which products are applied for (taken across a number of sample days) we saw that when selecting a new Income Protection product, 42% of people look at products with hospitalisation benefits, despite this being a feature of only 17% of products. Trauma benefit appears on 20% of applications but is present in only 5% of products.
So combined with the lack of a drop in insurance figures associated with other economic downturns, this increased focus on acute health conditions and income protection paints an interesting picture when viewed through the lens of the pandemic. It shows strong evidence that volatile health and economic conditions are driving people to protect themselves despite having less spending power. It points to the fact that while we’re all economising where we can, protection is starting to be seen as an essential safety net that many hope may mitigate some of the worst effects of the current climate.
What does this mean for our industry? These trends may indicate that protection awareness and a better understanding of the value for protection is on the rise. It may also mean that providers continue to prioritise product innovations that help consumers engage with protection products, at outset and throughout the policy (not just on payout). Consumer Duty also provides the opportunity to continue to look to improve consumer value, understanding and communication. The industry has already done sterling work in driving protection up the consumer agenda, such as the recent collaborative adviser guide from the AMI and the work that the IPTF has done.
We'll be taking a deeper look at the data and exploring these themes and more at our Protection Forum on 2nd February. The forum was set up to facilitate collaboration between Intermediaries, Product Providers and technology to address issues and growth opportunities collectively and we can't wait to see where this takes us.
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