It’s not always easy to convey to customers the true value of protection, especially during the cost-of-living crisis, but latest claims statistics for 2022 clearly demonstrate its importance.

Aviva’s data for last year, released in May, reveals that for the third year running it has paid out over £1bn in protection claims. That’s equivalent to an average of £2.9m in benefits being paid every day, with more than 50,000 families helped last year alone.

Aviva paid out more than £5m in children’s benefit

The support these payments provide cannot be underestimated, as many of Aviva’s case studies demonstrate. One that hits home particularly is that of four-year-old Lydia, who was diagnosed with cancer in 2020. Her parents, Paul and Dawn, had critical-illness cover that they had taken out to protect themselves, never once thinking it could be their daughter who would fall ill.

Lydia is now, thankfully, cancer free, with the whole experience having reinforced to Paul and Dawn not only that none of us know what’s around the corner but that protection can provide crucial support. Aviva paid out more than £5m in children’s benefit alone in 2022, supporting families through some of the most challenging times they were ever likely to face.

This uncertainty makes the role of advice more vital

Examples like these showcase the relief and gratitude felt by individuals when financial worries are lifted, leaving them to focus on what truly matters.

Extra benefits

As advisers, we know that the significance of insurance extends beyond the monetary compensation offered through claims. Additional services provided by insurance policies often make a genuine difference to people’s lives too.

There remains an element of doubt. Customers can be sceptical that insurers will actually pay out

LV=’s claims data, also published in May, shows a sharp increase in the take-up of these extra benefits. As well as paying out on 95% of protection claims in 2022, LV= recorded a 126% uplift in the use of remote GP services, a 71% increase in the use of mental health support services and a 61% rise in the use of physiotherapy services.

Challenges ahead

While claims statistics such as these fill me and the rest of my team with pride for the work we do to protect families, they also raise concerns about the future.

Additional services provided by insurance policies often make a genuine difference to people’s lives

Despite the clear need for protection, the current cost-of-living crisis and financial constraints may deter people from investing in insurance. Will individuals prioritise insurance over discretionary spending, such as their Netflix subscription? The latter, after all, may help someone’s life feel a little brighter in these challenging times.

This uncertainty makes the role of advice even more vital, especially as people understandably are reluctant to spend on insurance — no one wants to think ill health or early death will happen to them.

The significance of insurance extends beyond the monetary compensation offered through claims

There also remains an element of doubt. Customers can be sceptical that insurers will actually pay out. Discussing claims data is therefore important in helping members of the public overcome some of these misconceptions, and in building their trust.

Advisers play a crucial role not only in helping customers understand the need for, and benefits of, cover when they first take out a plan, but also in ensuring they remember that value over the long term. If they are clear on the risk, and on the benefit of protecting against that risk, the decision to buy and retain cover becomes much easier.

The support these payments provide cannot be underestimated

The rollout of the Consumer Duty rules this summer suggests this thinking is clearly understood by the Financial Conduct Authority. The duty places greater emphasis on price, value and products that align with customers’ needs, ultimately ensuring their best interests are served.

While for many of us this has been daily practice for years, the new rules can be only a good thing. We all need to help more customers choose products that can provide the support they need, when they need it most.

Edward Jones is protection advice director at L&C  

This article featured in the June 2023 edition of MS.

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