Rising living costs are creating 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 customer need. Eighty-six per cent of respondents identified it as the most important form of protection. This compared with 7% for critical illness cover and 5% for life-only term assurance.
The findings come as household finances remain under pressure. Two-thirds of brokers said the cost of living, including food, energy and household bills, was having the biggest impact on customers’ financial confidence. Just 15% cited mortgage rates and borrowing costs as the main concern.
However, the same pressures are making protection harder to afford.
Almost two-thirds (64%) of brokers said affordability was the main reason customers were declining protection cover. Many customers said household budgets were already stretched by other expenses.
The survey also found mixed signs on demand. More than half of brokers (57%) said customer demand for protection had not changed. Eight per cent reported falling demand, while 35% said demand was increasing.
LSL Financial Services said the results highlight a difficult advice environment. Customers are becoming more aware of the need to protect their income, but many have less room in their budgets to take out cover.
Craig Hall, director of strategic partnerships at LSL Financial Services, said: “The cost-of-living squeeze is making income protection more relevant. At the same time, affordability is becoming the biggest barrier to putting cover in place.
“Customers are rightly focused on whether they could continue paying their mortgage, bills and other essentials if their income stopped. That makes the advice conversation even more important.
“When budgets are stretched, brokers need to help customers understand what they can realistically protect and how cover can be tailored to their circumstances.
“It is encouraging that a third of brokers are seeing protection demand increase despite the pressure on household finances. But affordability remains a significant challenge, and there is more work to do to help customers understand the options available to them.”
