PFS conference: ABI says insurers are failing to engage consumers

26 November 2009 | By Nicole Blackmore

Speaking at the Personal Finance Society conference in London yesterday, ABI head of distribution policy Peter Jolly said life companies do not do enough to design products with consumers in mind and have failed to properly engage with consumers.

He said: “I guess the evidence of that is we need to sell them. If we had products that people really wanted they would come and buy them and most of the products in our industry are designed to be sold, rather than bought.  And the industry’s failure to develop a new regular premium savings product is probably evidence of that. As the endowment market tailed off we don’t really have a replacement.”

Jolly said in the broadband industry, despite the fact that the product is complex, consumers engage with the choices available to them and actively switch providers.

He said: “In our industry, 61 per cent of consumers reaching retirement did not switch annuity provider in 2007. Now what is more important - having capital for the rest of your life or a decision on which router you are going to use to get your internet connection? And that is the lack of engagement with the industry that the industry has to come to terms with.”

IJolly outlined a number of critiques of the life industry over recent years, including products designed around tax rules rather than consumers, unnecessary complexity and cost, poor levels of consumer engagement and low levels of financial capability.

Jolly said: “As product providers we probably give way too much choice and way too much complexity within products for some consumers.”

Jolly highlighted high administration expenses, a lack of product profitability, poor value for money and a failure to deliver on promises as costing criticisms of the life industry.

He said: “We have had numerous misselling scandals over the past 10, 15, 20 years and we’ve also had other issues, over insurers wrangling over CI claims and all sorts of things, to give the consumers a general perception that this industry is not one to be trusted.

“Product design can be fixed, unnecessary complexity can be fixed, relatively easily. High expense ratios can be fixed by a competitive market. A lack of profitability can be fixed by a market that is engaged. But when it comes down to consumer engagement, this industry has got some real challenges ahead. The failure to deliver on our promises and the lack of trust that has resulted in this poor engagement has profound consequences.”

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