28% of UK adults who purchase over-50s life insurance cancel their policy, according to new research by Royal London.
The study by YouGov indicates £173m of life insurance was lost in 2014, because 52,000 people cancelled their over-50s policy. In terms of premiums paid, collectively this represents £86m of customers’ wasted cash.
The mutual commissioned the study – which surveyed over 1,400 UK adults – to establish the extent to which over-50s life insurance customers miss out on protection through the cancellation of their policies. It also wanted to assess customers’ motives for lapsing and the emotional effect of their decision.
Royal London has published a report, High and Dry, which summarising the findings. It says the study highlights six issues which can’t be solved by one provider, they need attention from a united industry:
- The rate of policy cancellations in the over-50s life cover market, and effect on customers, is alarming;
- Cancellations are often driven by financial difficulties, and leave customers poorer and unprotected;
- The market place is crowded and can be confusing for consumers;
- Cancelling a policy is an all too quick and easy process, which drives profit for insurers;
- Most policies lack ‘safety’ features which customers need – product standards need a major rethink;
- The market needs more customer-focused products, designed for customer needs not maximum profit.
The mutual says the study highlights the extent to which some UK providers are abandoning Over 50s life insurance customers at a critical time, as they struggle to keep up payments. The findings indicate many customers who cancel their Over 50s life cover are financially vulnerable; for example, a quarter (25%) who lapsed their policy have ‘no savings or investments’.
33% of customers chose to cancel their Over 50s policy because they no longer ‘needed’ it anymore, a fifth (20%) of policy-holders said it was due to long-term money issues. Two in five people (40%) cancelled either because they couldn’t afford their premiums or because they needed to prioritise other bills instead – heating/energy and mortgage/rent were key priorities.
Jerry Toher, CEO of Royal London’s consumer division, said: “This research highlights how poorly designed products affect customers, especially those on low incomes; and confirms why the Over 50s life cover market must change current practices. I want to see the market remodelled – from the way products are designed, to the customer journey and how this type of insurance meets people’s real needs.
“I’m immensely proud of how Royal London has started to address some of the issues (for example our ‘Protected Payout’ feature, and the ability to reduce premiums) but I remain saddened by the fact we are the only UK insurance firm offering sensible ‘safety’ features. I hope our innovative work in this space, combined with the publication of independent research, inspires other UK life insurers to reassess how they operate in the Over 50s market.”
Royal London is urging over-50s life cover providers to consider how they can address the following:
- Improve customer outcomes by designing fairer products which better reflect consumers’ needs;
- Be more transparent about the options open to a customer in the event they have financial problems;
- Proactively offer pragmatic assistance to help people who wish to cancel due to financial hardship;
- Rethink the cancellation process, to support those who want to keep their cover but struggle to pay.
Toher added: “Not all Over 50s life insurance policies are the same – the underlying details can make thousands of pounds of difference to a customer. We urge customers considering this type of protection to shop around. But don’t just compare the price – take time to understand the product features and how it works to prevent getting caught out.”
“Armed with this new evidence, we are investigating how we can help more customers reach better outcomes, for example establish ways to better serve customers facing financial hardship. We now invite other organisations working in this space to respond and suggest ways to improve our market, so it works better for customers. A sea-change is within sight, but requires collaboration: commitment from providers, insight from consumer bodies on the frontline, and support from impartial advice organisations.”