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Advisers put off protection products by complexity

Overly complex protection products are putting advisers off discussing them, and putting clients off buying them, according to a study by one of the FCA’s advisory bodies.
The Financial Services Consumer Panel, a group that works with the FCA on policy issues, sought views from intermediaries, insurers, a reinsurer and mortgage lenders on issues and challenges in the protection market.
Their paper on the research published today says: “The benefits of income protection are hidden behind complex choices and caveats in the small print which mean advisers shy away from recommending it and consumers don’t understand it, or believe it to be of poor value.”
Complexity is also blamed for making the discussion around products take too long, meaning advisers and clients have less time to discuss them in the required depth.
Among the recommendations for narrowing the protection gap, FSCP says: “One thing is clear. It is time for the industry to develop less complex products that are designed for the needs of today’s customers in the modern labour market.
“Providers need to re-think income protection. The name needs to change and the product needs to somehow be made far less complex and easier to underwrite. Intermediaries were keen to keep the concept of income protection, but with more of the simplicity of critical illness.”
Most of those consulted feel robo-advice would not work in the protection market, the panel says, believing there will always need to be an element of human conversation when it comes to customers understanding their options.
“All felt the protection conversation would need a person to get the message across – even if this was a telephone conversation.
“Online-only would not provide the solution. There was also some concern that if mortgage sales became an online journey only, this would completely eliminate any protection ‘conversations’.”

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There are 2 comments at the moment, we would love to hear your opinion too.

  1. From this may one therefore infer that advisers find investments easier?

    If so it rather does confirm my long held suspicions and explains the popularity of passive investing and outsourcing.

    If life assurance is complex, where does that leave pensions? Are some advisers really up to the job? Or is it because advisers are now nothing but salesmen and women and it is the para planners that actually do the work?

    • Most life ass. plans aren’t complex. You seem to be overlooking CI and Income Protection. The real, most common hassle with protection is underwriting ~ non-disclosure, GP’s taking an age to complete and return medical history reports, proposers reluctant to submit to medical examinations and then, after all that, non-standard terms or possibly complete declinature. Plus, of course, lapses during the commission earnings period. I know you used to charge fees even for protection business but most proposers just don’t want to pay them. It’s not surprising that many IFA’s see protection business as more trouble than it’s worth.

      Some clients came to me a couple of years ago seeking life assurance. Their medical histories were such that the proposal forms took absolutely ages to complete (the wife was overweight because she ate like a pig) and the eventual terms offered included heavy premium loadings and various exclusions. What they’d done, before coming to me, was propose direct to a few other insurers and, having found the terms offered to be unaffordable/unacceptable, thought that, as an IFA, I’d be able to find them an insurer that would offer them the cover they need at ordinary rates. A complete waste of my time.

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