Squeezed middle paying out £3.7bn for life insurance before policies are cancelled by providers

04 February 2019

  • Billions paid in premiums before people feel the squeeze
  • 80% of 30-60 year olds want insurers to do more to help people in arrears
  • Co-op, in partnership with Royal London, launches Co-op Life Cover which offers a payment holiday solution for policyholders who may at times have periods of financial difficulty – such as illness and redundancy

The ‘squeezed middle’ are spending £3.7bn* on life insurance before having their policies cancelled by providers because they have fallen into financial difficulties, according to research by Co-op Insurance.

According to the findings, the average 30-60 year old in the UK had paid out £2,050 before their insurance was cancelled after holding policies for 8 years and 4 months paying £20.50 per month.

Only 48% of the ‘squeezed middle’ hold life insurance in the UK. Of those who have life insurance, nearly a third (31%) say they have struggled to pay for their life cover and, of these, two thirds (67%) have missed direct debit payments. This has led to over four fifths (87%) finding themselves in arrears.

78% of life insurance policyholders who found themselves in arrears had their policies cancelled by their insurer either automatically after the first missed payment or after a period of time.

Despite this, 87% of the ‘squeezed middle’ who have found themselves in financial difficulties have missed their own life insurance payments to pay relatives’ bills.

Over a quarter (27%) of the UK adults aged 30-60 with dependents are actually supporting their parents financially, with 78% supporting their children. Parents are depending on the children for the most money every month, an average of £235 whilst dependent children receive £177. Those who support both pay out an average of £186 per month.

Nearly half (49%) of UK adults aged 30-60 feel this is unfair and 80% want to see insurers doing more to help people who end up in arrears after paying for policies for often a prolonged period. Nearly two thirds (63%) think people should be treated on an individual basis and 58% want to see extended payment holiday periods.

Co-op Insurance has re-entered the life market and launched Co-op Life Cover alongside its partner Royal London which will offer a solution designed by Co-op Members, not widely offered in the market, to policyholders who may at times have periods of financial difficulty.

The product offers a level term, decreasing term or family income benefit and:

  • Includes the option to take two six month payment holidays throughout the lifetime of the policy after a 12 month qualifying period, allowing their policy to remain in force
  • Customers can also opt to reduce their cover level rather than pay back any shortfall at the end of the payment holiday window

Charles Offord, Director of Co-op Insurance, said:

“There is a clear life insurance gap in the UK, especially for those who are foregoing payments or not taking out cover to support relatives with their day to day finances.

“It just isn’t right that billions of pounds in premiums are being paid by customers on time, every month, for their policies to be cancelled when finances are stretched. At the Co-op we are keen to fill this gap and appreciate that sometimes finances can be stretched and people have to prioritise what gets paid, and what doesn’t.

“All too often, life insurance is seen as the least important payment, when really nothing could be further from the truth if something bad happens. This is why we have created up to six month payment holidays, alongside our partner Royal London, to help policyholders out in their time of need. We’ll also allow customers to reduce their insured amount rather than pay back any shortfalls to further lessen the financial pressure.”

Jerry Toher, CEO of Royal London’s Consumer Division, said:

“We all face money problems from time to time and as a mutual insurer, we want to help consumers when they go through these hard times. Royal London, along with our partner Co-Op Insurance, is proud to be one of the few providers offering a product that allows the financial flexibility of a payment holiday. Customers can take a break from paying their monthly premiums and keep their life insurance cover at a time when they are financially vulnerable, instead of losing cover altogether.”

Product overview

  • Level – pays out a fixed lump sum. This cover has been designed to provide a lump sum for dependents
  • Decreasing – Pays out a single amount that reduces over time. This cover has been designed to help cover a repayment mortgage based on a fixed interest rate of 7%
  • Income benefit – a monthly income of up to £2,500 paid between claim and the end of the term

Co-op Life cover will also include an optional serious illness cover. This benefit pays out a set amount of money to the customer on diagnosis of a one of the following six serious illnesses: cancer, heart attack, stroke, multiple sclerosis, benign brain tumour and dementia.

Customers can find out more information by calling 0800 678 3928 or visiting www.coop.co.uk/life


Notes to editors

*There are 27 million aged 30 – 60 in the UK – 48% of those in the survey have taken out life insurance.
48% of 27 million = 12.95 million
31% of 12.95m them had struggled with payments at some point = 4,014,500m of these 67% of have missed direct payments = 2,689,715m and 87% of them have ended up in arrears = 2,340,052 and of these 78% have policy cancelled by provider = 1,825,240 Average 30-60 year old in the UK had paid out £2,050 before their insurance was cancelled after holding policies for 8 years and 4 months paying £20.50 per month. £2,050 x 1,825,240 = £3.7bn

About the Co-op:

The Co-op is one of the world’s largest consumer co-operatives with interests across food, funerals, insurance, legal services and an online electrical store. It has a clear purpose of championing a better way of doing business for you and your communities. Owned by millions of UK consumers, the Co-op operates 2,600 food stores, over 1,000 funeral homes and it provides products to over 5,100 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail Limited. It has more than 63,000 colleagues and an annual revenue of £9.5bn.

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018. Royal London also has partner relationships to provide protection for Post Office Management Services and Clydesdale Yorkshire Banking Group.

For further information contact:

Jenna Moss: jenna.moss@coop.co.uk / 07770 441 828 Follow us on Twitter and Instagram @coopukpress