Deter clients from cancelling protection policies to make savings
It will probably be self-evident to advisers that the increases in the cost of living are already having a tangible impact on their clients’ incomes, their mortgage affordability, and their ability to secure finance.
At such a time, it is absolutely understandable that individuals are looking at what leaves their bank account each and every month, and working out whether some of these costs for products and services are absolutely essential, or if they can be cut in order to fund, for example, rising energy, food and clothing costs.
We could see a ‘bonfire of direct debits’ and given the recent profit forecast from Netflix this appears to be already happening.
What is however extremely important for both advisers and their clients is that the latter do not conflate their monthly subscriptions to streaming platforms or regular beer deliveries, with those they are making to financial providers for much-needed protection and insurance cover.
We might all understand why a run-through of monthly direct debits might illicit a reaction of ‘what am I getting for this money?’ when viewing monthly premiums for income protection or life insurance or critical illness.
So, it is going to be important for the advisory community that we re-engage with clients and highlight exactly what this money affords them, and what the consequences might be if they decide to cancel premiums and policies.
Engaging with clientsThis is why I was very pleased to see Association of Mortgage Intermediaries (AMI) tackling this head on with its recent guide for advisers on selling protection, which also included a consumer-focused document that could essentially be used to highlight what cancelling a policy means, but perhaps more importantly provides advisers with an opportunity for client contact.
This may begin as a conversation about protection and what it might deliver if a job is lost or ill health stops clients from working, however it could also help open the door to further monthly cost savings for a client.
It may well be, for example, that a client is coming to the end of their mortgage deal, and the adviser can provide an outline of the products available, their cost and how a potential monthly saving here might mean they can hold onto policies or indeed other subscriptions that they otherwise might feel they have to cancel.
There may well be a temptation – particularly as the first new energy bills of this new increased tariff era begin popping through front doors and into inboxes – to run a metaphorical scythe through any outgoing that looks unnecessary, but the argument from advisers should actually be the opposite.
Explain the benefitsAgain, we want to highlight the position they may be in should the worst happen. Should the main bread winner lose their job or lose their ability to work, should a family member require a lengthy stay in hospital, etc.
If you intend to rely on savings in order to get you through such a period, then how long will this last you? A third of UK people have less than £600 in savings put away – how many mortgage payments will this cover, let alone the other household bills?
Of course, this is not about frightening people into holding onto protection policies, but it is about helping them weigh up how they would cover themselves in the circumstances outlined above.
And, as you will know from countless client interactions, it’s often the case that you’ll be able to help in a variety of ways following that initial communication, and you can provide solutions to problems that the client may not have even thought about or knew existed.
Now is therefore definitely the time to make that client contact, to prevent any rash decisions being made, and to highlight once again the ways in which you can help.