More than 10 years ago, while still working full-time for a newspaper, I was approached by a company with a revolutionary idea. It wanted to sell life insurance over the phone and could do so more cheaply than anyone else and would I write about it?
That day marked my first meeting with Tom Baigrie. Already a successful IFA in London, he created a new firm, LifeSearch, specialising in protection which, uniquely at the time, would be sold exclusively over the phone.
The products came with advice and were taken from a full panel of providers on The Exchange trading system, a prototype electronic “community” originally set up by the insurance industry in one of its rare collaborative bouts at the start of the early 1990s. Not only that but LifeSearch also guaranteed to be cheaper than any other firm operating in the same market.
Most personal finance journalists at the time declared LifeSearch a winner, even though nowadays Tom has rowed back from trying to be the cheapest and prefers to talk about the quality of advice given to consumers by its sales advisers. It is fair to say that over the years LifeSearch has probably done more to popularise the concept of protection for UK householders than any other single organisation in the UK, including the ABI. Yet the industry itself has been shockingly bad at promoting protection to consumers in a consistent, targeted and appropriate manner.
By that I do not mean the opportunistic and haphazard sales of critical-illness or whole-of-life products usually linked to mortgages. The far more serious grind of helping clients to understand why it makes sense to take out cover against a range of life events that can threaten their long-term income – and devising a product that adequately covers against those events – is something the industry has signally failed to achieve.
According to Swiss Re’s 2009 annual report in June, individual income protection sales reached almost 127,000 last year. This theoretically ought to be good news – it is up by 13.5 per cent over 2007.
But as Edmund Tirbutt observed in the magazine Health Insurance & Protection, the figures included more than 29,000 policies from HSBC, whose cover is more akin to payment protection insurance than income protection. Without HSBC’s contribution, total new IP sales during 2008 fell by 11.2 per cent.
The danger of this approach is that it has left the market open for some of the worst perversions of the income protection business, namely the kinds of PPI cover happily missold by many lenders and big retailers over the past decade. In turn, this has bred massive consumer cynicism towards all other types of insurance, even where the products themselves are perfectly acceptable.
Which is where Tom Baigrie comes in. Last year, he wrote a key article in Money Marketing, in which he called for the industry to launch a generic campaign promoting protection products to the general public.
Sadly, although Tom managed to wheedle £100,000 out of the industry for research into how such a campaign might be set up, it proved impossible to squeeze the much bigger sum of £5m for an initial ad campaign, never mind the additional £3m annually to build on growing public perception of this issue. He has, probably wisely, called it a day – at least for now.
I always thought this was a campaign unlikely to get off the ground. In January 2006, I wrote about the problems faced by consumers in understanding the kinds of premiums they might have to pay, how long they might have to wait to be paid, even the definition of disability that determines whether they might be paid anything at all.
Three years on, almost nothing has changed. Alan Lakey, of Highclere Financial Services, wrote a fortnight ago about continuing problems over unfair claim definitions such as any occupation which “cannot reasonably be met unless the claimant is immobile or hospitalised”.
Lakey also identified problems with tests centered on the inability to perform a set of activities. In some cases, these could exclude claimants with two broken arms, even blindness.
The reality is that an industry unable to agree the most basic wording and definitions of its income protection, preferring instead to churn as much profits as it can out of inferior – but much easier to sell – critical-illness products was never going to stump up £5m for Tom’s campaign.
Still, it says much of him that at least he tried – and as much about the industry that it refused to back him.
Nic Cicutti can be contacted at email@example.com