Call for cooperation and help for customers in difficult times

As many of us know, and will remember from the 2008 credit crunch, some of the first things to be cancelled when people experience financial hardship are their protection policies. 

Currently most insurers allow premiums to be missed, for up to a few months before cover lapses. No doubt this is helpful, but to reinstate or to continue with cover the policyholder must be able to repay all of their missed premiums which can be daunting at the best of times, let alone in the world we may soon find ourselves in. 

The other option that customers may have is to reduce their cover. This can be useful, but it is often a permanent decrease with any future attempt to revert to the original cover level requiring a new application or at the very least reunderwriting. 

The Protection Distributors Group (PDG) write to call on all insurers to address this challenge head on, and to prepare early. We need to work together to keep as many policies live as we can. Why? Because these are incomes for all of our organisations, because cancelling cover when it’s needed most is a detrimental outcome for customers and because it’s the right thing to do.

What can insurers do?

We appreciate that there will be system restrictions that might present challenges, but the alternative could be losing lots of policies. This list is not exhaustive and you may have ideas of your own, but following are some of our thoughts on how insurers could further help customers to keep their plans in place during these unprecedented times: 

1. Consider a payment holiday for people who have lost work, much like those being offered for people with mortgages. This might mean the customer is not protected during this time, but at least they are not building up a debt of missed premiums. After 3-6 months they could reinstate cover, with no new underwriting or payments to make up. 
2. Allow career breaks to be taken on income protection policies if a client faces redundancy/unemployment, without the need to have paid a year or more in premiums beforehand.
3. Allow customers to reduce cover temporarily. Even by reducing cover for 3-6 months you could give people the chance to get over the hardship of losing their job, business or from being without much income for a period of time.
4. Considering waiving premiums in exchange for a sum assured reduction. For example, the customer can write off their next three premiums but the sum assured will reduce by a figure, for example £5,000. This could be a way around stricter system restrictions and potentially be one of the easier options to implement.
5. At the very least we ask insurers to please be flexible and even offer to write off the occasional missed payment, if it would help keep the client on the books.

 These don’t need to be full T&C changes, they are temporary measures in extreme circumstances to help vulnerable customers.

What can intermediaries do?

The onus cannot be solely with insurers. Intermediaries have a big role too. Intermediaries should: 

1. Inform insurers ASAP when there are potential problems with payments.
2. Supply full details on why these special measures are needed on each case.
3. Take every measure possible to avoid anti-selection risk.

What else can we do?

We (PDG, insurers and reinsurers), could lobby the government to provide support to help people keep these plans in place. After all, most policies have support services such as counselling, helplines and GP services, many of which will be providing vital support during and after the COVID-19 crisis. They’ll be no good if people are cancelling their policies. 

We would also like to report to the market what we are doing. In addition to worried customers, there are worried advisers, and I would imagine very concerned insurers. These are worrying times, but this is a time for us to show solidarity, and to pull together as an industry who do everything to help their customers and not abandon them at their time of need. In turn, I hope these actions will not only help us to retain and grow the trust in our industry, it could also help some intermediary business from ceasing trading and most importantly help our loyal customers when they need us most.