Weathering the Cost of Living Crisis Through Insurance

Laura Murray: Hello and welcome to the Sapiens Insurance 360 Podcast. I’m your host, Laura Murray, Marketing Manager at Sapiens, and I’m so glad that you’re out there listening. This is where we discuss the latest news, trends, and issues from around the insurance solutions and technology spectrum. Of the many domestic issues in today’s news cycle, the cost of living crisis remains front and centre. From home prices to the cost of eggs, inflation continues to grow as economic uncertainty increases. But while consumers continue to brace themselves for the dreaded ‘R’ word – recession – insurance can provide financial protection, reduce unexpected expenses, and offer flexible coverage options. And that’s the subject of today’s podcast, “Weathering the Cost of Living Crisis Through Insurance.” And to help us unpack how insurance can provide financial security and peace of mind during periods of economic instability is Stuart Hayman, Director, Insurance Practice at Sapiens. Stuart is a successful life and pension executive with over 30 years’ experience in the Life and Pensions industry, gained from a manufacturing and outsourcing background with tier-one insurance companies and providers. Stuart, welcome back to the programme!

Stuart Hayman: Thanks, Laura. Happy to be back!

Laura Murray: Great. So let’s get started. There seems to be much more awareness now for the need for financial protection and resiliency. What do you think has prompted this?

Stuart Hayman: I don’t think it’s any one thing at all. I think it’s a combination of factors. And if we think back to Covid, that really focused people’s minds on the need for financial resilience and income protection comes to mind straightaway because throughout Covid, and thereafter, we’ve seen income protection education across the media. And this has been aided by industry efforts to communicate the benefits. And in addition, there are so many today, people in rented accommodation, and they too realize during COVID that they need an income to pay the rent in the event of being unable to earn an income through sickness or disability. And furthermore, regulation means income protection is now part of the holistic financial considerations for IFAs. So when you are sitting in front of an IFA now, as a customer, you can expect them to discuss your resilience in times of disability or injury preventing you from earning an income.

Laura Murray: Thanks for that, Stuart. So why do you feel we are witnessing an increase in income protection sales right now?

Stuart Hayman: Okay. I think it’s human nature, a lot of it. I think a cost of living environment really does focus attention on the importance of having a regular income. And with the increased awareness prompted through things like the pandemic, as I’ve already said, and particularly those without generous employer income guarantees, people have don’t mind looking at income protection as a security blanket. And the other reason is awareness. There’s been a plethora of education on income protection, along with real life case studies, and a lot of product innovation has really heightened the importance of this product. There is an organization called the Income Protection Task Force, a not-for-profit group based in the UK that was inaugurated back in 2005 with the aim of boosting awareness and as a consequence, boosting sales of income protection. And they’ve done this really, really well using real-life example case studies. It’s funded by the members from the personal protection industry, and Sapiens is one of those people. They also facilitate industry collaboration and provide resources for advisors to learn about and discuss income protection measures. And more recently, they have reached out to government to see whether there is a possibility to collaborate, particularly bearing in mind that governments are not just in the UK, but governments around the world are reviewing, their supply of welfare services.

Laura Murray: That’s really interesting, Stuart, and good to see that organizations are taking this on in quite a serious regard. Have the reasons for wanting income protection changed? As we know, traditionally these types of policies were written to normal retirement age to safeguard the policyholder in the event of disability or sickness.

Stuart Hayman: Yes, they have. Yeah. And it takes me back a number of years in my career in Life and Pensions, when income protection was a product written to retirement age, with the intention of providing an income in the event of disability or sickness throughout one’s working life. But now it’s not just regarded as a product just for income protection. And as I mentioned earlier, we’re seeing a lot more demand for this product from people who have regular outgoing expenses. And some people have marketed income protection as expense protection as well. And renters, again, are a very good point to consider, because they are very vulnerable in the event of disability or sickness from losing the roof over their head if they cannot afford the ongoing rent that’s due. And of course, with the cost of living continuing to rise, be that rent, be that food, be that utilities, be that whatever, having a guarantee of expense coverage, as well as income coverage, is becoming more and more essential.

Laura Murray: Thanks for that, Stuart. So there’s clearly demand, but how do you see insurers reacting to the current market?

Stuart Hayman: Well, the insurers are really, really the bull by its horns in this space. So what we’re seeing now are new income protection products with shorter terms and possibly even shorter claim periods to meet the different needs of customers. And one thing I’ve noticed particularly is that they’re starting to use data to target customer segments. And I come back to renters again, that’s a brilliant example of how renters are now a significant group who are looking for security. The self-employed, they’re another cohort particularly realizing the benefits of income protection and all this is being crystallised by economic circumstances. And what I mean by that is there is less reliance on the state and the cost of living, of course, and inflation. Added to that, what we’re seeing is providers provide what we call “added-value services.” And some evidence recently I was reading, is showing that these are really, really being taken up by policyholders. So things like access to doctors and specialists, services as a value add, access to a remote GP as a value add, access to mental health and physiotherapy services as a value add, access to lifestyle guidance, even second medical opinions. And with income protection, let’s not forget rehabilitation services. These are increasingly popular and insurance companies, yes, yes, they insure against risk, but they’re moving more and more and more to what I would call risk mitigation. And one of the new services is what I have read about is early intervention services. This is a service which allows those who suffer at a disability or an illness, resulting in a claim to get access to specialists to help them on their road to recovery.

Laura Murray: Thanks Stuart. So to wrap things up, do you think insurers will take advantage of the current economic uncertainty and devise other instruments to provide additional security? And since AI is topping on everybody’s radar at the moment, do you think AI will come into play with these new products?

Stuart Hayman: Most definitely. I believe we will see much, much more innovation in this space. And with an increased usage of data, I believe we will see providers developing very personalized offerings to their clients. And with regulation providers, as I said before, now have a duty to ensure the products and services meet those ever-changing needs of customers. Not forgetting that in this industry, we work in Life and Pensions, policyholders typically take out policies for a number of years and over that period of time, their needs change and the economic climate will change. And so, product providers have to be cognizant of that need and be agile and fleet of foot. And another thing I’ve noticed is that there’s much more attention on customer behaviours throughout their lifestyle. So we’re seeing behavioural management services coming to the fore as well.

Laura Murray: Stuart, thanks so much for your thoughts today and for appearing on the program. Today’s economic instability is a continuing story and we’ll all just have to wait and see how it plays out. But having insurance options that consumers can rely on to weather the stormy economic sea certainly provides peace of mind for so many of us. To our listeners, as always, we love hearing from you. So if you have any comments or would like to follow us on social media, please reach out to us on our channels. And as always, don’t forget to subscribe to the podcast. We’ve got so much more coming. So stay tuned for our Sapiens Insurance 360 podcast. Bye for now!