The rising cost of living poses an affordability challenge for protection advisers, according to new research from LSL Financial Services.
A survey of brokers at LSL’s inaugural Protection Forum in May found that income protection is now seen as the area of greatest need for clients. Eighty-six percent of respondents considered it to be the most important form of protection. This compares to 7% for critical illness coverage and 5% for life insurance only.
These results come at a time when household financial situations remain under pressure. Two-thirds of brokers said living costs, including food, energy and household bills, had the biggest impact on clients’ financial confidence. Only 15% were cited Mortgage rates Borrowing costs are the main concern.
However, the same pressures make it difficult to provide protection.
Nearly two-thirds of brokers (64%) said affordability was the main reason clients were declining protection cover. Many clients said household budgets were already burdened by other expenses.
The survey also found mixed signs on demand. More than half of brokers (57%) said client demand for protection had not changed. Eight percent reported declining demand, while 35 percent said demand was rising.
LSL Financial Services said the findings highlight a challenging advice environment. Clients are becoming more aware of the need to protect their income, but many have less room in their budgets to hunker down.
“Cost-of-living pressure makes income protection even more important,” said Craig Hall, director of strategic partnerships at LSL Financial Services. “At the same time, affordability has become the biggest barrier to providing coverage.”
“Clients are rightly focused on whether they can continue to pay their mortgage, bills and other necessities if their income stops. This makes the advice conversation even more important.
“When budgets are stretched, brokers need to help clients understand what they can realistically protect and how cover can be tailored to suit their circumstances.
“It is encouraging that a third of brokers are seeing an increase in demand for protection despite the pressure on household finances. But affordability remains a major challenge, and there is more work to be done to help clients understand the options available to them.”
