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Tom Baigrie: A radical idea to guarantee protection payouts

Tom Baigrie

Having written my last column from an Iron Maiden gig, this one comes from Lord’s, happily only a few hundred yards from where the Protection Review Conference has just finished. It is a tough life. Before dashing across to watch a brave Misbah-ul-Haq defying a rampant England pace attack, I listened to lots of opinions on how to grow our market and, in particular, that part of it should flow from the mortgage market.

For me, the best idea came from my old sparring partner Mike Ward. Mike is a successful protection entrepreneur and serial software inventor, and in his latest incarnation has enjoyed tremendous success in the online travel insurance market. Like others, however, he has not found it possible to match those results when trying to get online consumers to want to do the sensible thing with regards to protecting their families through life, critical illness and income covers.

It seems that because the financial catastrophes we offer protection against happen (thankfully) so rarely, people need to have the personal consequences of ignoring the risk explained to them, along with the value of the policies we have developed to do the protecting.

In other words, consumers need to be persuaded and reassured if they are to spend good money protecting themselves against catastrophe. Until a digital marketing method of explaining these things in a way that engages consumers is invented it means people are needed in the process.

Mike’s solution to this was radical: develop a policy where the cover is guaranteed to pay out no questions asked. Certainty will change the way consumers think about us all and as that certainty (and the likely anti-fraud measures needed) means the cover would have to cost more, so then distributors would earn more and be able to spend more on the needed marketing and persuading. And so our market grows.

The first guaranteed-to-pay policy could do fantastically well, particularly if offered with its price guaranteed on application via a point-of-sale underwriting system.

I know from past failure that developing new products for deeply fragmented distribution is not easy. But post-RDR there is a lot more focus on protection from those who lead the networks, so a premium priced policy offering both something different and genuine value for money, and perhaps only available to those advising offline, might do well.

This would particularly be so if those doing the persuasion and reassurance learn from another bit of genius that came from Helen White, late of the Association of British Insurers. She enjoined us all to not seek to educate consumers but rather to engage them emotionally with their future, thus making them want to secure it. That is what a good adviser does.

So while, like Mike, I will continue investing in online comparison, guidance and simplifying the doing of the right thing, I might also start a school for protection advisers.

Tom Baigrie is chief executive of LifeSearch  



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There is one comment at the moment, we would love to hear your opinion too.

  1. Talk me through how this would work Tom. How do you go from point of sale system u/w system to a guaranteed payout protection product? Where does the additional due diligence that would need to occur take place. Post sale – then the insurers would get bad press for taking people off risk having found they had not been full in their disclosures. So more ammo for Mr Prestridge and the FOS…

    And is this the same Mike Ward who made his fortune from moving clients with more expensive bank protection products in a previous incarnation. His latest incarnation is I think called “Are you paying too much”…

    Do you think that this might be a cunning ploy to again promote his business. Stop paying too much for this guaranteed product that contains margins to protect against anti-selection and move to this nice cheap contract.

    What you end up with is a unbalanced book where many of the healthy lives vote with their feet leaving a disproportionate block of unhealthy ones that cant move.

    I think that you should concentrate on the cricket in future and keep such ideas to yourself…

    Guaranteed products can work in controlled distribution situations but in the wider market probably a non-starter.

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