General insurance review

The cost-of-living crisis will affect client buying habits

Geoff Hall

chairman, Berkeley Alexander

We’re all acutely aware of the rising cost of living. People everywhere are having to make tough decisions on where to cut back. Some may struggle to keep up with monthly payments and might need to make changes to their insurance arrangements that could leave them without an adequate safety net.

Everyone in the insurance industry has a duty of care to support those struggling to meet the cost of insurance premiums. As a trusted advisor, your role must be to reach out and gain a deeper understanding of each client’s current situation and look at where they could make savings on insurance whilst still ensuring products meet their needs.

With mortgage rates rising fast and first-time buyers finding it harder than ever to get on the property ladder, we are seeing a rise in multi-generational living, and likewise increased demand for cross-generational mortgages – something the government is apparently actively considering. But what about insurance? A standard household policy will cover the policyholder and direct family members living with them, but each individual will have different insurance needs dependent on lifestyle. Young adults may have expensive hobbies, whilst their parents or grandparents may have high-value contents such as jewellery, art, or antiques. The more people you have in a property, the greater the likelihood they’ll have more to insure.

Similarly, the more people, the higher the probability of a claim. For a number of reasons, including the current cost-of-living crisis, insurers are expecting claims frequency to increase. It’s worth remembering that you need to keep your clients’ information up to date so that cover remains suitable. That doesn’t just mean sums insured but other relevant information. Many insurers include the number of people in a property as a rating factor, so if the homeowner does move parents in, or adult offspring return to the fold, be certain the insurer is made aware.

Talking about claims – Zurich has reported that the cost of living is also fuelling an increase in insurance fraud, with people exaggerating or entirely falsifying claims for items such as jewellery and electrical goods. The insurer says fraudulent property claims are up by as much as 25 per cent.

As an agent, you have a role to play in helping your clients through the claims process – but in a fair and equitable manner, for everyone’s benefit.

HIGH-NET-WORTH CLIENTS ARE NOT IMMUNE TO THE CRISIS

Your high-net-worth (HNW) clients are also facing tough times. Whilst they might feel more insulated than those on lower incomes, they’re not immune to the cost-of-living crisis, and will start to feel the pinch as prices continue their ascent. Here are a few things to consider.

High inflation will mean that items such as Rolex watches increase in value. You cannot rely on index linking alone when times are this volatile, so there is an increased onus to ensure that clients have valuations carried out more often on all high-risk valuable items, whether they be watches, jewellery, or works of art.

Clients with spare cash or savings may be looking to put that into inflation-busting assets – like classic cars, art, and jewellery. Remember that Everyone in the insurance industry has a duty of care to support those struggling to meet the cost of insurance premiums ... your role must be to reach out and gain a deeper understanding of each client’s current situation

HNW insurance is based on sums insured (rather than bedroom-rated), so additional items will need to be added accordingly.

HAVE YOUR CLIENTS HIT PAUSE ON SHOPPING AND SWITCHING?

According to analysis of ABI data conducted by the Financial Times, the pricing reforms launched in January are reshaping the personal insurance market. Almost 420,000 fewer people expected to switch home insurance providers when they renew their cover this year. We are seeing this in our own stats. Over the past three months, across our whole standard household book, we have actually seen average premiums fall by 0.2 per cent, leading to fewer clients requesting alternative quotes.

The FCA’s personal lines pricing rules aimed to tackle ‘price walking’ practices, which disadvantage loyal customers, and to deliver an insurance market built on a foundation of fair value.

You have an opportunity to pick up the slack, especially if you have a strong GI provider in your corner delivering access to a broad range of products. Provide the information and advice homeowners need and guide them toward products that deliver the cover that best meets their individual needs, at a price that makes sense based on their current financial situations. M I

Supporting customers in the cost-of-living crisis

Jon Bowen

customer director, Paymentshield

Looking at current data on customer cancellations and retentions for 2022, one thing is clear: the cost-of-living crisis of 2022 is currently having much the same effect on customer behaviours as lockdowns, furlough, and job insecurity did last year and the year before. The rates of cancellations are roughly the same, and the reasons people are giving are, too.

But that does not mean the intermediary market should consider the current situation to be predictable, more of the same, or under control. For one thing, at time of writing the full impact of spiralling energy costs has not yet hit – and we do know that winter will only be harder on UK households.

Certainly COVID has prepared insurers and brokers for the need to support customers in times of financial difficulty – but with such times not abating, is there still more the industry could be doing?

The market adapted well during the pandemic, with many innovative initiatives to ensure that a continuation of cover could still be provided and to reassure customers when their world was turned upside down. Many of these initiatives are still in place and are even evolving. Here we look at five of them, and call upon our colleagues, peers, and partners across the industry to come together and collaborate to continue to support and protect the customers on whom we mutually depend.

PAYMENT OPTIONS

In 2020 Paymentshield introduced the initiative of giving customers access to a three-month payment holiday if they were struggling to keep up with payments during lockdown. We have maintained these measures to date because we understand that people are still struggling, and we believe it’s the right thing to do to offer solutions when needed.

It is also important to offer as flexible as possible range of payment options – such as annual, nine-monthly, monthly with no deposit – and with an APR that is regularly benchmarked to remain competitive.

ADDITIONAL TRAINING

In line with the FCA’s requirement to “provide your customers with an appropriate level of care and support,” customer care teams the length and breadth of the country will be receiving training to help them recognise which customers may require more help than others. To go above and beyond this, we must make sure in particular that we can not only identify vulnerable cases, but quickly adapt our approach to give them the support they need.

This is where today’s tech platforms help: where the need for support has been identified, regardless of the communications channel, it can automatically be flagged on the system so that for any future interactions agents are quickly alerted in order to provide the best possible outcomes for the customer. At this point, those agents should have the training, the autonomy, and the initiative to offer customers a better alternative than simply cancelling their insurance.

POLICY CHANGES

If customers make contact and are concerned about keeping up payments on their policies, and perhaps even considering cancellation, advisors can offer them advice to help them to stay covered. For example, an advisor might change elements of the existing policy, perhaps stripping out (even if only temporarily) ancillary or non-essential elements, or even recommend moving to a new policy to meet customers’ changing needs and circumstances.

FAIR FEES AND CHARGES

We do not charge a default fee if a customer misses a payment, nor do we chase debt or leave default records for non-payment, helping to avoid pushing the customer into further financial hardship or distress.

If customers make contact and are concerned about keeping up payments on their policies, and perhaps even considering cancellation, advisors can offer them advice to help them to stay covered

If customers miss a payment, we always give them 45 days from their payment due date to make that payment, and will only ever cancel the policy 10 days after a second payment is missed and after reaching out to try to offer them some support.

ESCALATION

In difficult times, it pays to remember that you are not alone. The intermediary community is a collaborative and supportive one – and that message extends to the customer. If customers are struggling with their finances, we’re able to share contact details for support services such as the Citizens Advice Bureau, or even to escalate to other support groups and charities that can offer more specialist support than we can. M I