I’ll tell you what really gets my goat. IFAs who have moved into the protection space without first properly understanding what they are doing.
It is a concern that is shared by others, including the regulator. While most of us have no issue with proven advisers making more protection based recommendations, which should in fact be widely welcomed, some of the sellers moving into the protection space are doing so because they have been less successful, shall we politely say, in other areas of financial planning.
They buy in third party generated life cover leads to keep afloat, but as there are so many ‘advisers’ doing this right now, they have pushed up the price of these leads to unprecedented levels, which for the wrong business model could potentially be a very short-term and counter-productive cycle.
It also may not result in the best of outcomes for consumers. If the seller does not know their market (or their client) properly the conversion rates on those expensive ‘leads’ might not be great. So you buy more leads, which raises the price further.
What might they do to tackle this? Some have started buying cheaper accident, sickness and unemployment/payment protection insurance leads instead with the sole intention of trying to flog them some life cover. They have probably not sold a proper income protection/protected health information plan for 10 years – if ever – and have little if any idea about the products currently available or indeed any wider marketplace issues. So they stick to selling ‘cheap’ life cover to the cheapest leads money can buy. While others have gone from selling the simplest product in the protection armoury (life cover) to one of the most complex, which needs genuine independent advice: income protection.
Protection providers have already warned that new regulation such as Solvency II, RDR, tax changes and gender-neutral pricing will significantly impact the cost of protection policies later this year, which could impact on the protection market in many ways.
While persistency of existing business should improve, those models who rely on buying leads and switching policies could also struggle. On the positive, however, if prices are set to rise, that’s usually a good time to start buying.
Mark Dennison is director of LightBlue UK, a protection adviser