General insurance review

Tighter belts: How can we help?

Emma Green

Director of distribution, Paymentshield

When energy prices shot up in April, UK households started suffering the worst squeeze on real income in 30 years. As of March 2022, approximately nine in 10 UK adults (87 per cent) had already reported an increase in their cost of living. The following month, our research showed that 61 per cent of the British population were seeking to reduce their spending.

As the year unfolds and costs continue to spiral, consumers will face some serious challenges in order to take control of their personal finances, buffer the strain of inflated prices, and keep unexpected expenses at bay.

Naturally, we may expect many consumers to come forward and seek professional advice about becoming more financially resilient. Yet our latest survey of 2,059 UK adults in April 2022 found otherwise, indicating a widespread reluctance to seek assistance, with over one in five UK adults deeming talking to financial advisers “overwhelming”.

The high levels of embarrassment associated with asking questions about finances are glaring. This is why, during last month’s National Conversation Week – a campaign aimed at getting people to talk more about their finances – we encouraged advisers to proactively anticipate questions that could help consumers manage their finances and achieve long-term financial wellbeing in a time of economic turmoil.

‘IS NOW A GOOD TIME TO REMORTGAGE?’

This is a question likely to be on the minds of many British homeowners whose bills – including their mortgage payments – will continue to rise with their deeper economic struggles.

Many consumers will be interested to know whether they can get a better mortgage rate, and this could be a strong option for many looking to tighten their belts. Yet we know that remortgaging has often been an overlooked area when it comes to advising on financial prudence. In a YouGov survey of nearly 5,000 UK adults that we conducted at the end of last year, we found that of those who had remortgaged in the previous two years, a huge 47 per cent said they had done this independently, signalling that remortgaging is still a vastly untapped area for advisers.

As well as being a financially worthwhile decision for the client, remortgaging can also be a golden opportunity for advisers to ascertain whether their customers’ proposition continues to be fit for purpose by offering them a GI review at the same time.

‘IS INSURANCE LESS OF A PRIORITY NOW?’

Many policyholders will also be wondering whether they’ve struck the right balance between insurance cost and coverage. This resonates with our most recent research, in which 15 per cent of UK consumers said that in the next 12 months they would be likely to reduce their spending on insurance products. The affordability issue instigated by the rising cost of living is likely to see many customers choosing cheaper policies, or even cancelling them altogether.

But while cutting down on spending is one way to save, we must all ensure that clients understand that any costcutting exercises should not come at the expense of proper coverage, which can help insulate them from hefty, unexpected costs further down the line.

This is where advisers should leverage their expertise, helping their clients to navigate insurance offerings by assessing which policies and products are financially worthwhile in the long run and better suited to their needs.

‘HOW CAN I FEEL MORE IN CONTROL OF MY FINANCES?’

The inflation-induced scramble to cut costs may also result in customers shopping around and turning to comparison sites for short-term salvation. But when considering longterm financial health, the value of a few pounds shaved off an insurance policy may not be the wisest way to save.

By favouring price over quality, comparison sites overlook the true meaning of value to the customer – that is, their policy actually being of worth and suited to their specific needs.

Instead, being in control of one’s own finances means receiving tailored support throughout life’s different turns – whether it’s about purchasing a property, changing profession, or navigating an economic downturn. This is why, in the face of rising living costs, we encourage advisers to take proactive steps to initiate GI conversations with their customers. Re-evaluating whether any circumstance or priority has changed since a customer’s last review will avoid leaving them financially exposed, ensuring they aren’t wasting money on products that are no longer fitting.

NO SILLY QUESTIONS

The rising cost of living has triggered greater uncertainty about how to manage finances effectively. Navigating these choppy waters naturally raises important questions, which we cannot afford to leave unanswered.

Many consumers may be reticent to start a ‘money talk’, but advisers can empower them to make the most worthwhile decisions at the right time. Not only will this approach bring financial wellbeing to their clients, but it will also instil the idea that there really are no silly questions. It will encourage them to look for valuable, professional advice and give them the confidence to seek support rather than staying silent. M I