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Emma Thomson: Keep it simple to encourage protection

Simple. It’s the current buzz-word, with providers developing, launching and even re-launching propositions featuring the word ‘simple’.

I largely support the simple products initiative, but I don’t see it as the complete answer to our national problem of under-insurance. Education, marketing and government incentives are also needed if the balance is to be fixed and simplification should not rob us of differentiation and choice within the protection market.

There is no ‘one size fits all’ solution when buying protection. Providers should simplify where they can, while still ensuring customers can find cover that suits their situation best.

Simplification should not just concern products. The application and post-sale processes should also be simpler. We need better technology and more up-front underwriting. For example, by adding BMI to quotes to give a far more accurate price to customers and by adopting systems like UnderwriteMe.  

Products and processes are not the only areas that need simplifying. We should also try to get rid of some historic complexities that have no commercial benefit and that few can defend.

What about universally agreeing to define income protection deferment periods and benefit amounts, in weekly or monthly terms? One or the other, not a mishmash of both. The current situation can create confusion when obtaining and comparing quotes, especially for those who are not protection experts. To grow the market it’s these advisers we must reach out to.

Making terminology and different options simple to understand will reduce intermediaries being put off discussing protection, especially income protection, which is the product most needed by consumers but the one that is least sold or bought.

Then there’s commission. While some want it banned, those voices will not include the advisers helping ordinary families arrange protection, as we know that people on average incomes cannot afford to pay fees for advice.

Putting that debate aside though, why are there two commission scales; Lautro and annual premium income? API is also known as annual premium earnings, just to confuse matters further.

We don’t just have a terminology issue here. One provider’s 165 per cent Lautro rate is not the same as another’s and income protection Lautro rates are often calculated differently from life rates. As a result I’ve yet to find anyone who supports still using Lautro, other than those who cite their enslavement to ‘legacy systems’. API is a much more transparent way of looking at commission rates so it should be the calculation we all use.

These issues might seem a little trivial in the grand scheme of things, and to an extent they are. But we need to do all we can to encourage more intermediaries to talk to their customers about protection. If these ‘trivial’ differences – and there are many more than I have discussed here – continue to be a barrier to some advisers writing protection business, there is surely an argument to simplify these things as well as products and processes. 

Emma Thomson is life office relationship director at Lifesearch

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