by Bethan Moorcraft 05 Apr 2022
Everyone is feeling the financial squeeze. Around the world, people are struggling to keep up with the cost-of-living and household budgets are under strain due to the rising price of housing, gasoline, energy, and groceries. In the United Kingdom, they are calling it ‘the cost-of-living crisis’.
Every market where Insurance Business has a publication experienced significant inflation over the 12-month period from January 2021 to January 2022. In the United Kingdom, where inflation has been deemed a ‘crisis’, the annual inflation rate increased to 5.5%, the highest reading since March 1992. Meanwhile, in the United States, the Consumer Price Index (CPI) jumped to 7.5%, marking the largest 12-month increase since the 12-month period ending February 1982, and in Canada, the CPI increased by 5.1%, surpassing 5% for the first time since September 1991.
Countries in Asia-Pacific followed similar trends. Over the 12-month period from December 2020 to December 2021, the CPI in Australia rose by 3.5%, with the most significant inflation being felt in new dwelling purchases by owner-occupiers (+4.2%) and automotive fuel (+6.6%). During the same period in New Zealand, the CPI jumped by 5.9%, and in Singapore, the annual inflation rate was 4%.
There are many factors driving inflation worldwide, including the COVID-19 pandemic, recent shocks to the global supply chain, soaring production costs, and Russia’s invasion of Ukraine, among other things. And as things stand, the global economy isn’t likely to make a quick U-turn in the coming months.
This could be problematic for the insurance industry. I think it’s fair to say the average consumer already resents paying their insurance premiums, but they’ll begrudge paying even more when they’re struggling to put food on the table for their families or to fill their cars up with gasoline. As the cost-of-living soars, I think there will be a boom in people looking to shop the insurance market – and they’ll have one thing on their minds: price.
Now is when brokers really need to switch on and shout about their value proposition. Yes, a cash-strapped consumer could re-shop their auto insurance by going online and getting a quick quote in a few minutes. But that’s not necessarily going to get them the best coverage for their unique needs, or even the best value for their money. Only brokers can deliver that level of customer service consistently in every single transaction.
When every single penny/cent counts – as it does for many families in this challenging economic climate – people start to scrutinize where their money is actually going. While they may have favored the quick convenience of online insurance shopping in the past, that digital experience could soon turn sour if they have questions about their coverage or how to perhaps save some money in the short term.