The study, carried out on behalf of Royal London, of more than 1,400 UK adults assessed customers’ motives for lapsing and the emotional effect of their decision.
The research found that policy cancellations were often driven by financial difficulties but the loss of protection left them in a more vulnerable situation.
The process for cancelling policies was revealed to be too easy and quick. The mutual is calling for providers to be transparent about options available to customers if they are struggling to pay and wants them to try to find an alternative solution for borrowers wishing to cancel a policy because of financial difficulties.
The mutual wants the industry to design more customer-focused products which have built in safety features but to do this it said the industry needed a ‘major rethink’ of life insurance product standards.
The report, High and Dry, accused life insurance providers of abandoning their over-50s customers at a critical time when they are struggling to keep on top of their payments.
A quarter who were unable to maintain payments on their policy had no savings or investments.
Some 33% of customers chose to cancel their policy because they no longer needed it but 20% said it was due to long-term money issues.
Two-in-five policy holders had cancelled their premiums because they were unaffordable or because they needed to prioritise other bills, such as heating and rent, instead.
Jerry Toher, CEO of Royal London’s consumer division, said: “This research highlights how poorly designed products affect customers especially those on low incomes and confirms why the over-50s life cover market must change current practices.”