Debt and investment are not yielding much return these days and so the game has turned to the smallest financial services sector, the one that should be the biggest, protection.
It has often seemed to me that the protection market is an inverse one. Falls in price lead to a reduction in sales, increased competition leads to increased fragmentation of distribution, both the reverse of what you would expect. What seems most needed is a rise in prices, so that those who want to grow by proposition and then brand and marketing development can shake themselves free of the nihilists who want a price war in a stagnant market. Let us hope that one benign effect of the credit crunch will be that a tightening of capital makes our market come to life again.
There really is no point in speculating on its possible malign effects. Who can fathom where the bankers and credit analysts’ disasters and the mortgaging of entire economies to try and avoid a depression will take us? When you envy an undertaker his job security all bets are off.
I take solace from the fact that history always repeats itself differently and perhaps the woes that afflict us will not be those of the only previous banking crisis of this scale. Rather than turn this into a suicide note let us bravely continue with Plan A. That is a marketing campaign to drive home to consumers they need to take responsibility for their own disaster recovery. The mood out there is of fear and caution and taking care and that surely is the time to sell insurance.
A fortnight ago, I proposed in this column a marketing campaign to seize this moment and I have been frankly amazed at the positive response. Not one reinsurer, insurer, trade body or distributor has told me they will not support such an effort and many have said they will. So the plan moves on and I hope to come back to the industry with a plan of action. That plan is being drawn up by a team whose CVs will reassure those we intend to ask for first-round funding. We will get that, for it is not a big ask and our plan is a timely and attractive one. We will use that funding to develop a fully costed proposal for public awareness marketing campaign that can and we hope will be supported by politicians, regulators, consumer campaigners, the media and the industry. We will then seek funding from all industry parties. Gett-ing that will be the hard part in these crun-ched times but if we succeed, then that generic public-opinion-changing campaign will break and, we trust, be followed by individual corporate-led campaigns.
If you ask where the money might come from, I say: “Put up your premiums and protect the public properly.” That is easy to say but difficult to achieve as at this time the market is flooded not only with those elephants crowding the Google bus but also start-up refugees from the mortgage and other affected markets. These chaps will cut prices to win market share, long before they realise you cannot make money that way. Lapse rates are rising strongly and unless providers discipline distributors and demand profitable behaviour, we are still a serious shakeout away from turning the pricing corner and making such a campaign likely to yield profit for our market. But that’s OK, such a campaign will take time to materialise and providers might well have changed their approach by the time it does. Here’s hoping!
Tom Baigrie is managing director at Baigrie Davies Lifesearch