Letter to UK life insurers makes a number of suggestions about how to support customers during crisis
The Protection Distributor's Group (PDG) has called upon the life insurance industry to "work together" to keep policies alive during the coronavirus.
Alan Knowles, managing director of Cura and chair of the Protection Distributors Group, said: "Whilst the Chancellor's bailout for employees last week was welcome news, there are still a lot of people who are being hit financially as a result of COVID-19. For those of us who remember the 2008 credit crunch, you'll know that insurance policies are often one of the first things to be cancelled in times of financial hardship. Advisers and insurers need to work together, be prepared and where possible be flexible to help their loyal customers through this incredibly challenging time."
While premium holidays for a few months are obviously a great help for some customers, the PDG said that the requirement of policyholders to repay the missed premiums to reinstate cover can be "daunting".
It added that the option to reduce premiums often means that future attempts to revert to the original level requires a new application or at least reunderwriting.
These obstacles could lead to some customers cancelling their policies, the industry body warned.
As a result the PDG has made a number of suggestions in relation to how insurers can support policyholders to ensure they keep their cover in place.
- 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 three to six months they could reinstate cover, with no new underwriting or payments to make up.
- 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.
- Allow customers to reduce cover temporarily. Even by reducing cover for three to six 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.
- 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.
- 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.
It added that these don't need to be full terms and conditions (T&C) changes as they would be temporary measures in extreme circumstances to help vulnerable customers.
The PDG also stated that intermediaries also have "big role" to play to support customers at this time. These responsibilities include:
- Inform insurers ASAP when there are potential problems with payments.
- Supply full details on why these special measures are needed on each case.
- Take every measure possible to avoid anti-selection risk.
The PDG also highlighted that keeping the market informed and reporting on what it is doing in response to coronavirus is crucial at this time.
"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," said the PDG.
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