A survey carried out by LSL Financial Services at its inaugural LSL Protection Forum revealed that 86% of brokers said income protection was becoming more necessary for clients. Respondents said this was the most important cover, as just 7% named critical illness cover and 5% said life-only term assurance.
At the same time, two-thirds of brokers said the cost of living was having the biggest impact on people’s financial confidence, ranking above mortgage rates and borrowing costs, as said by 15% of respondents.
Although a need for income protection was identified, brokers said financial pressure was making cases harder to place.
Some 64% of brokers said price and affordability were the main reasons customers declined protection.
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Majority say demand for protection is not growing
Brokers were asked if the demand for protection had changed, particularly in the current economic climate, and 57% said there had been little change. A further 8% said demand was falling.
Conversely, 35% of brokers witnessed a rise in demand, which LSL Financial Services said was an encouraging sign that more people were recognising the need to protect their income.
It said the findings demonstrated the advice environment brokers operated in, where clients were aware of the need for protection but did not have the financial flexibility to take out a policy.
LSL Financial Services said the findings point to a difficult advice environment in which customers may have a clearer need for protection, particularly income protection, but less room in their monthly budgets to act on it.
Craig Hall (pictured), director of strategic partnerships at LSL Financial Services, said the findings showed an “emerging paradox”.
He added: “On the one hand, the cost-of-living squeeze is making income protection more relevant. On the other, it makes affordability the biggest barrier to putting that cover in place.”
Hall said consumers were “rightly focused on whether they could keep paying their mortgage, bills and other essentials should their income stop”, saying this made the advice conversation more important.
Hall continued: “When budgets are stretched, brokers need to help customers look beyond the monthly cost and understand what they can realistically protect, where the biggest risks sit and how cover can be shaped around their individual circumstances.
“It is encouraging that a third of brokers are seeing protection demand increase, despite the pressure on household finances. But the affordability challenge is real, and there is more work to do to help customers understand their options and build the right level of protection around what they can afford.”
