In 2024, the UK has undergone something of a transformation.
A new government has stepped into power, inflationary pressures are easing, and mortgage rates from some providers have started to fall. But the horizon is not without one or two clouds.
Household budgets are still tight. In January, the Financial Conduct Authority reported that around 28 per cent of adults were still feeling the pinch – a marked improvement from the 36 per cent who felt the same in early 2023, but still hardly ideal.
In a tricky financial environment, income protection can provide a valuable lifeline should someone be unable to work due to illness or injury.
In the past, the product was overshadowed by critical illness cover, life insurance and the various forms of general insurance. But now, with more people realising the importance of protecting their income in times of instability, income protection is stepping into the limelight, providing more people with valuable peace of mind.
Shifting economic and protection landscape
We cannot discuss the UK protection market’s future without first examining its recent financial history. Inflation peaked at 11 per cent in late 2022 and took almost two years to fall back to the Bank of England’s 2 per cent target.
While the economic recovery has provided some much-needed support for households, the overall mood could be described as ambivalent: we are not quite out of it yet. Core inflation, which excludes more volatile factors like food and energy, is still higher than expected, and at the time of writing the Bank of England interest rate is still high at 5 per cent.
For many, these elevated interest rates have meant higher mortgage repayments and increased financial strain. Cost of living pressures persist and, with 1.6mn homeowners coming off fixed deals in 2024, the outlook for many may have been concerning.
Meanwhile, mortgage lending for house purchases is predicted to fall by 8 per cent in 2024, reflecting reduced buyer activity due to affordability concerns. As a result, traditional protection products tied to mortgages, such as life cover, have seen slower growth.
But in a time where every spare penny counts, income protection has quietly surged in popularity. Income protection sales across the industry increased by 8 per cent in the first quarter of 2024 compared to the previous year.
UK workers are looking for a financial safety net, and it is clear that income protection is a growing consideration.
Everything begins with education
Awareness of income protection is on the up, marking a shift from the years when it was perhaps seen as less important. However, a general lack of education continues to hold its widespread adoption.
Let’s consider a worrying truth. Many UK workers overestimate the support they would receive if they could not work due to illness or injury.
