CONSUMERS CUT INSURANCE TO SAVE CASH 70% of financial intermediaries have seen consumers cut protection cover
Posted on: 03 July 2012
Consumers in financial difficulties have cut back on protection and non-essential insurances to save costs according to a recent survey from the UK’s leading provider of face to face debt advice – EuroDebt Financial Services. In the survey of over 100 Independent Financial Advisers, 70% said their clients had taken this action*. Furthermore, 60% of respondents to the survey said they had seen an increase in the number of clients in financial difficulty in the past year.
The EuroDebt survey reveals a stark picture of the impact increased living costs, stagnant wage inflation and a contracting job market is having on family finances.
Gerry Mansfield, Head of Business Development of DEMSA member EuroDebt said: “These are sobering statistics and sadly things aren’t going to get any easier anytime soon. Our experience through the recession has been that more and more financial intermediaries have discovered clients in financial difficulty when they have received a claw back on commission from insurance cover that has been dropped.
“Whilst it seems sensible to cut back on non-essential items when money is tight, short term fixes such as cancelling non-essential insurance covers can leave consumers much more vulnerable and may prove to be a false economy. We’re not just talking about cover for the washing machine, boiler or for vet’s bills, all of which could prove eye wateringly expensive, income protection for example can prove vital if you were to lose your job or become unable to work through no fault of your own. The survey confirmed that loss of income was the primary (46.5%) reason for getting into financial difficulty, which mirrors EuroDebt’s own experience for clients seeking debt advice.
“We advise even those clients in serious financial difficulty and entering a Debt Management Plan (DMP) or alternate debt solution, to be very selective about the insurance covers they plan to cancel, as coping without the cover if things do go wrong could make their situation much more difficult to manage. The best way to tackle financial difficulties is to take a long hard look at the total financial picture rather than just the monthly shortfall. We work with the financial intermediaries in our introducer network to enable them to deliver holistic financial management even when they don’t want to offer debt counselling themselves. We also offer compliance support in partnership with the Association of Professional Debt Solutions Intermediaries (www.apdsi.org.uk). The majority of the respondents to the survey were sole traders and our experience is that compliance can be a major burden on small businesses.”
Gerry concluded: “Building consumer confidence in the current economic is critical and the majority (52.4%) of the intermediaries surveyed have been in business for over 10 years. We are members of DEMSA, whose code of conduct is approved by the OFT, and we are proud to be founder members of APDSI, where we encourage debt solution intermediaries to operate to their code of conduct when dealing with consumers and small businesses in financial difficulty. It is our experience that brokers want to maintain longstanding client relationships through good times and bad.”