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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 7 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.

      • This is an interesting story which we hear a lot. Many IFA’s and mortgage advisers are now referring to specialist protection advisers. This means that rather than walking past the protection conversation, they are still able to carry out their duty of care to their clients, whilst at the same time ensuring they receive a level of protection expertise they deserve.

  2. Yes income protection is arcane. But life cover? What’s complicated about that. Fill in the form get the premium, decide to take it. Put in life of another or trust. If (when) you die the benefit is paid. What’s so complicated?

  3. I don’t really think income protection is that difficult to understand, its basically tailoring a plan to cover your income when your earnings cease after being off ill. Then will continue to pay out until you return to work or the pan ends ……. not really confusing

    Yes there are shorter payout periods available and things like indexation to consider but next to life cover surely it’s the easiest to understand …?

    The real issue now is the race to confuse everyone with the new critical illness plans
    Almost every provider now had standard cic cover then upgraded all with differing bells and whistles that really complex and lead to massive confusion and really unclear which cic plan each provider is offering

    Why can’t providers all offer a singular cic plan without having to double up the confusion trying to win a numbers race. If you want to play in the number game make a decision and offer one plan either traditional cic or or the more comprehensive plan
    It’s gone mad at the moment

    • 10+ years ago, you could have put a fag paper between the CIC offered by different providers. Surely we should welcome providers efforts to cover more conditions and increase the likelihood of payout. Such life changing cover should not be seen as a commodity…. successful claimants certainly don’t. Advisers need to advise. We’ve got Fracture Cover, Best Doctors, more conditions, partial payments…. and who would have thought we’d have a product covering Dementia and Frailty into our later years. Society is changing… we need to change and one size does not fit all.

  4. Life/CIC/IPC complicated. Really?

    Important thing is that most clients need the protection…. the consequences of not having it are too severe. If you are an IFA/Mortgage Adviser then I think you are duty bound to offer it, or as David Mead says, refer it. If it seems complicated then spend the time to understand it. FOS seems to agree!

    I’m sure most Level 3/4 qualified individuals would agree that they have both the capability and skills to offer suitable protection advice to their clients.

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