As the cost of living crisis continues, people may be struggling to keep up with their monthly payments and could be looking to reduce household costs in order to cope with demands on the family purse.
The FCA is concerned that families and those most affected by the current economic climate might look at cutting insurance policies alongside other areas like streaming services, clothes, holidays etc. Already we are seeing the effect of families and individuals cutting back on items such as petrol and diesel where sales fell by 4.3% in June as prices at the pumps hit new records, according to monthly retail data. Clothing sales also dropped by 4.7%, with reports from retailers to the Office for National Statistics indicating that people are cutting back on all types of retail spending due to concerns over what they could afford.
The FCA’s concern is well founded. The rise in the cost of living will make the vulnerable more likely to cancel or cut back on personal insurances for homes and cars, as well as for life assurance. Assurant Intermediary already offer support schemes where needed for vulnerable customers. A lot of these support schemes were put in place during the pandemic, but their success is totally dependent on knowing difficulties in advance, rather than only finding out when a policy or direct debit mandate has been cancelled.
Graeme Trudgill, executive director at the British Insurance Brokers Association (BIBA) said that customers who cut back on their insurance cover because of cost of living pressures ‘may be missing out on vital insurance cover when they need it most.’ This can create other problems, too, given that motor insurance is a legal requirement and buildings insurance is often a condition of homeowners’ mortgage contracts.
Customers who move to a lower priced insurance contract might also be left short if the worst happens. Underinsurance, where customers reduce the financial cover and leave themselves unable to meet the full cost of repair or replacement after an accident, is already evident in 40-45 per cent of claims, according to BIBA’s figures.
The FCA has called upon the industry to provide more support to vulnerable customers. We are asking all of our introducers to be in contact with all of their insurance clients and make sure they are coping with the cost of living rises.
If you then identify a customer that you believe may be vulnerable, or indeed already know of a vulnerable customer, please let us (and any other provider they have policies with) know and we can assist with our support and communication accordingly.
An adviser support pack was created at the start of the pandemic to help with general customer contact but especially during difficult times. This pack along with other useful information you may find helpful is available through the Adviser Support Services page on our website.
For those customers who could be thinking about stopping or reducing their protection cover, or maybe just need your help generally, your advice and guidance will be vital to their financial wellbeing.