Every pound counts
How ABI members are helping customers cope with the cost-of-living crisis
The cost of living crisis is hitting households and businesses hard. Faced with rising energy and grocery bills, inflation currently at a 40-year high and expected to rise further, and businesses facing higher operating costs and supply chain problems, many are having to make some very difficult financial decisions.
The information here outlines how ABI members are supporting their customers during these difficult times.
At this time, the protection and security provided by insurance and savings products is more important than ever.
For example:
- Paying out £500 million to homeowners and businesses who suffered damage during the storms in February.
- Paying a record £18.6million every day in life insurance and income protection claims.
Insurance plays a pivotal role supporting a resilient economy by providing financial protection to millions of businesses to help them survive many financial setbacks, such as a flood, fire, or insolvency of a trading partner.
The ABI has also published information for consumers on how to manage the cost of both home insurance and motor insurance.
Our products help make customers, communities, and businesses financially resilient in times of need.
Helping society to build a financial safety net and for customers to be prepared for unexpected events and shocks along life’s way is a core purpose for the insurance and long-term savings industry. From life insurance to critical illness cover or income protection, home insurance for storm or flooding damage, our sector stands ready to support customers in their hour of need.
For those struggling to pay their premiums at this time, some providers can offer payment holidays, such as on life insurance and income protection products.
We are working hard to increase access to affordable products despite rising cost pressures for the industry itself.
Like many other industries, insurers face increased costs. Vehicle repair costs have risen by 30% in recent years. Rising cost trends are driven by the increasingly sophisticated nature of vehicles, which are more expensive to repair and delays in the delivery times for many new vehicles have in turn pushed up the value of second-hand vehicles.
Also, a global shortage of some vehicle parts, such as semiconductor chips (of which the average car can contain up to 3,000), has been made worse by the Covid-19 pandemic and the Russian invasion of Ukraine. Coupled with shortages of skilled labour in the vehicle repair sector this has led to some customers facing longer vehicle repair times.
Property insurers are facing a rise in the costs of construction materials and labour.
Despite rising costs, the current average price paid for motor insurance, at £416, is at its lowest in nearly seven years. The average price of home buildings and contents insurance are both at record lows.
The ABI is an active member of the UK Government’s Financial Inclusion Policy Forum. The Forum is chaired by the Economic Secretary to the Treasury and the Minister for Pensions and Financial Inclusion, and brings together key leaders from industry, charities, consumer groups and regulators.
In 2021 the ABI chaired a Sub-Group of the Forum looking at increasing the uptake of contents insurance to protect those on low incomes from financial shocks. As some local authorities and housing associations have arrangements to offer lower cost home contents insurance to their tenants, the ABI has produced a guide for social landlords and housing officers to help tenants access affordable cover for their possessions.
We work with charities and partners to provide simpler information and access to support.
Our members are helping those who are struggling financially to access information and support in numerous ways. There are strong associations between financial and mental wellbeing, and the cost of living crisis is likely to have significant implications for mental health in the UK.
Some members are funding national charity partnerships – one insurer for example has so far donated £500,000 to a national charity to help those struggling financially. Another has invested in a housing trust that is building 630 affordable homes. Some offer enhanced mental support services, including additional information services and special helplines with qualified staff trained in conjunction with mental health support groups.
In 2020, the insurance and long-term savings industry came together to raise over £100million for the Covid-19 Support Fund. Whilst the key aim was to provide immediate relief for those most impacted by the pandemic, some donations were made to provide longer-term support including schemes to reskill more than 8,000 people through The Shaw Trust, the Learning and Work Institute and The Financial Times’ new charity, the Financial Literacy and Inclusion Campaign, to improve financial literacy.
With 40% of adults admitting that they are not confident using numbers in everyday life, the ABI and several major insurers have teamed up with Plain Numbers to ensure clear and simple use of numbers in their customer communications.
The ABI and its members have engaged with mental health charities and campaigners to understand the needs of those with a history of mental ill health and recognise there are steps that can be taken to improve access to insurance, how questions are asked, communications to customers and transparency of underwriting decisions. The Mental Health Standards were launched as a result to provide clear guidance for insurers to support the needs of people with previous or existing mental health conditions when they seek insurance cover
We play a big role as institutional investors in tackling the long-term root causes of rising bills, particularly energy supply.
We are working closely with the Government and Regulator to deliver meaningful Solvency II reform to boost the insurance industry’s capacity to, in the longer-term, tackle one of the root causes of rising household bills by investing in renewable energy.
Many households and businesses will understandably be looking closely at where they can make savings. When it comes to insurance and savings remember to:
Talk to your insurer. If you are concerned about not being able to afford to pay your premiums, speak to your insurer, or check their website to see if they can help. Flexible payment options and payment holidays may be possible on some policies. You may be able to adjust the scope of your cover to reduce your premium, but bear in mind that you may not be covered for some losses.
Check any insurance benefits offered by your employer. It is worth checking if your employer offers any group insurance benefits, such as critical illness or private medical insurance. Insurance products and the services included in them play an important role in supporting health and wellbeing, keeping people in work, and helping them return to work when they leave due to illness or injury.
It can pay to shop around. Insurance is a very competitive market, so it can pay to shop around. But make sure that the policy you choose best meets your needs.
Consider the consequences of going without insurance. Whilst some might be tempted to not take out insurance or renew a policy when the time is due in order to save money, it could be more costly in the long run. For example, travelling abroad without travel insurance could cost hundreds, if not thousands, of pounds if you need emergency medical treatment. Not insuring your house could be a breach of your mortgage conditions or result in expensive repairs if there is a storm or fire. Third party motor insurance is the legal minimum requirement when driving in the UK and driving without it risks being penalised or worse.
Buying cheap motor insurance from an illegal insurance adviser could leave you driving illegally, risking a fine, penalty points on your licence and having your vehicle seized. If you are suspicious, check if the seller is on the Financial Conduct Authority’s Financial Services Register and contact the Insurance Fraud Bureau’s Cheatline.
Don’t put your retirement at risk. Reducing your pension contributions might seem tempting, but it could have a significant impact on your pension at retirement. For any options, speak to your pension provider, or your employer if you are in their auto enrolled scheme.
Also, when you save into a pension, the Government boosts your pension contributions with tax relief. And if you leave a workplace scheme you will lose out on contributions from your employer.
Self-employed people also get tax relief. This means that money you would have paid in tax on your earnings goes towards your retirement savings instead.
See if you are eligible for Pension Credit. Figures from the Department of Work and Pensions showed that in 2020, over a million pensioner households are missing out on the payment. Visit the website here to find out if you might match the criteria.
Be on your guard against scams. Criminals may look to target your pension savings or offer you cheap insurance. Always report unsolicited contact to your pension provider and report it to Action Fraud.
Some useful sources for help and information
Commenting on behalf of the ABI, Director General, Hannah Gurga said:
“Our industry understands these are difficult times for many UK households and businesses. Some are having to make very painful financial decisions, with family budgets under extreme pressure.”
The insurance and long-term savings sector exists to provide financial support to millions of customers to help them cope with unwanted and costly events, such as a flood, serious illness, or injury and to help savers secure a more financially comfortable retirement. This is why the industry is committed to doing all it can to support customers and is ready to work with the Government to help people and businesses through these challenging times.”