Brokers are facing a "protection affordability paradox", LSL Financial Services has stated, as rising household costs are making income protection more important for customers, while also making it harder to afford.

The firm’s broker survey, conducted at its inaugural LSL Protection Forum, found that 86% of respondents see income protection as the area of greatest customer need.

This is far ahead of critical illness cover, which stood at 7%, and life-only term assurance at 5%.

Two-thirds (66%) of brokers also said that the cost of living, including bills, energy and food, was having the biggest impact on customers’ financial confidence, compared to 15% who cited mortgage rates and borrowing costs.

However, LSL said the same financial pressure appears to be making protection harder to put in place.

Of those surveyed at the forum, 64% stated that the primary reason customers are looking for declining protection is because of price or affordability, with household budgets being stretched.

When asked how customer demand for protection was changing in the current economic climate, 57% said there had been "no real change", while 8% said demand was decreasing.

LSL said its findings point to a “difficult advice environment” in which customers may need a clearer need for protection, particularly income protection, but with less space in their monthly budgets to act on it.

Director of strategic partnerships at LSL, Craig Hall, stated: "Findings from our Protection Forum last month showed an emerging paradox. On the one hand, the cost-of-living squeeze is making income protection more relevant. On the other, it makes affordability the biggest barrier to putting that cover in place.

"When budgets are stretched, brokers need to help customers look beyond the monthly cost and understand what they can realistically protect, where the biggest risks sit and how cover can be shaped around their individual circumstances.

"It is encouraging that a third of brokers are seeing protection demand increase, despite the pressure on household finances. But the affordability challenge is real, and there is more work to do to help customers understand their options and build the right level of protection around what they can afford."

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