With many people unable to work, on furlough or sadly being made redundant, these are hard financial times. It’s understandable that many people will be reviewing their expenditure and deciding what to cut back on. Without your help, there’s a real risk their protection insurance won’t make the cut.
Drive home the value
Provided the client has affordability, it’s important to get ahead of the lapse risk and drive home the value of their protection. Now is as good a time as ever to remind clients why they took out their cover in the first place.
A good starting point is to reach out to your clients to ask if they’re okay and whether they want to talk. Protection is very personal and you can’t beat a personal conversation about their specific situation.
Providers offer a wealth of resources to help drive home the value of protection, such as risk tools, case studies and guides that put the protection premium into perspective relative to other regular outgoings, like a takeaway or TV subscription.
This is also a great time to ensure your clients know what additional benefits come with their plan. Usage of remote GP services has increased significantly in recent months. Mental health support is also especially valuable during these difficult times.
Some insurers, such as Vitality, also offer additional benefits to their customers, which would be lost if they cancelled their policy.
It’s also worth pointing out that if someone cancels, they lose their guaranteed premium and they might not even be able to get cover down the road if they suffer a major health issue in the meantime.
Tips to keep clients covered
There will be many clients that really want to keep their policy but simply can’t afford to or the cover is no longer fitting, such as an income protection policy when someone has been made redundant. For these situations, some insurers have really stepped up to the plate to offer solutions for clients to maintain or pause their cover and premiums.
The FCA recently issued some guidance for insurers to allow clients to maintain their cover but defer their premium payments for 1 to 3 months (premiums would need to be repaid after the deferral period but some insurers will allow this to be spread over a number of months). In addition, some providers now offer other valuable options.
For example, Vitality have offered clients going through financial difficulties the option to reduce their cover and premiums by 25%, 50% or 75% for a period of 3 months. This is very welcome as it helps clients to save money whilst still maintaining some level of cover.
Protection: Why ongoing communication is vital for client retention
Other providers have offered breaks where both the cover and premiums are paused for a specified period, with the maximum being 6 to 24 months. It’s important to note that clients wouldn’t be covered during this time but it’s a valuable option for income protection clients that have lost their job as it means the client wouldn’t need to cancel their plan and reapply once they’re back to work. You can find out more in this guide to premium holidays and career breaks.
Advice from the Protection Distributors Group (PDG)
The Protection Distributors Group (PDG) teamed up with the Association of Mortgage Intermediaries (AMI) and the Income Protection Task Force (IPTF) to put together this guide to saving protection policies that is worth a read. It provides some useful considerations, like lowering the policy interest rate on a mortgage life plan to reduce the premium.
These are difficult times, but protection is and will continue to be important. For many who have needed to claim it’s been a literal life saver. We need to ensure that clients don’t cancel their cover lightly and for those who are struggling with affordability, it’s definitely worth finding what their insurer can do to help.
Tom Conner is a director at Drewberry, the London and Brighton based financial advisers. Tom has worked in the health and protection advisory market for 10 years and is a founding member of the Protection Distributors Group (PDG).
Tom’s ‘Monthly Musings’ are inspired by his desire to break down complexity and grow the market. Tom shares his valuable adviser perspective on some of the key challenges facing the profession in 2020.
