While some sectors, like the equities market, have been hit by volatility and the mortgage market may well see demand suffer if a recession hits, conversely the protection market is surprisingly buoyant in an economic downturn.
Why? It’s because the evidence from the financial downturn after the 2008 financial crisis suggests that in times of hardship people become risk averse and look to protect their finances. Additionally, as the mortgage market stagnated many brokers turned to protection advice to supplement their dwindling income from mortgage sales.
The 2010 Swiss Re Term & Health Watch Report showed that, from 2008 to 2009, new term assurance sales rose 4.1% up from 1,447,895 to 1,507,685 policies. Critical illness sales increased by 3.8% to 530,214 from 511,045 in 2008 and new whole life business increased 12.6% from 282,438 to 318,078 policies.
While the impact of Brexit on the economy is too early to ascertain fully at this point, the risk of an economic downturn is very real and there is no time like the present to protect an income, whether it be again ill health or unemployment. The Swiss Re figures suggest that consumers are more likely to be receptive to those kinds of conversations in times of uncertainty. It’s also worth bearing in mind that during the last financial crisis many providers began to pull out of the market for unemployment cover as demand spiked.
So the message to mortgage advisers and financial advisers across the country is to keep protection at the forefront of your mind in the current economic climate, and don’t assume that hard times mean consumers are less likely to be prepared to spend money on premiums to protect their finances. History suggests otherwise. In fact, there are quite a few politicians whose policies may well start paying out before the next column is published.
