View more on these topics

Focus on Protection

IP is the Bermuda Triangle of protection.

According to the Swiss Re report 2005, around 92 per cent of advisers say they recommend income protection but when the consumer emerges from the advice process, very few people have actually puchased an IP product.

So IP goes into the advice process but disappears at some point between initial recommendation and point of sale, just like the aeroplanes and boat which are never seen again.

The 170 billion quid question is, what will it take for the market to mature from the ugly duckling it currently is, into the swan it should be in order to close the IP protection gap?

Swiss Re’s annual industry protection report found that the IP gap grew to £170bn in 2005 while the protection gap overall stayed static at £2.3 trillion.

Despite being championed by key players in the market, regulation under ICOB rules, and widespread acknowledgement by advisers that it is undersold, IP sales have continued to dwindle. But no one seems to have come up with a conclusive explanation for its failure to catch on.

Could the solution be to launch IP only brokerages like British Insurance managing director Simon Burgess is planning to do next year? This may go some way to making the product more widely available to the consumer but they still need to know what the product is and why they need it in order to seek it out.

The key word here is demand. The consumer does not know what IP is, therefore why would they want to buy it? They cannot want something that they do not realise exists. And if the adviser is indeed recommending the product, then perhaps, dare I say it, they are not doing a good enough job.

The consumer does not know best; the adviser does. This is why the consumer has gone to the adviser to be recommended appropriate products for their needs. If the adviser is not making it clear enough to the consumer why they need this product and how essential it is then the fault must lie with the adviser.

The scale of the problem is such that it cannot simply be the case that the consumer is made aware of the risks of not having IP but still walks away, despite being warned that if they fall ill they will be left financially exposed.

And if the adviser is not pushing it enough then there similarly must be a reason for this. Does it come down to the two most pressing issues in an IFA’s working life; time and money? Not enough time to explain the somewhat complex IP products out there and not enough of a commission reward to make it worth their while?

All of the above may be akin to teaching an Olympic runner to crawl but sometimes it is necessary to go back to basics to understand why something is not working.

The Association of British Insurers held a conference on Friday to discuss how to tackle the main barriers to selling increased volumes of IP and came up with five themes it hopes to take forward to grow the market.

Let us hope the outcomes of the ABI’s work will be a set of realistic, practical and achievable aims which will solve the mystery of protection¹s Bermuda Triangle.

Recommended

Capita picks up Scottish Life contract

Capita has been appointed to provide investment administration services to Scottish Life’s pension portfolio plan promising advisers a 60 per cent reduction in costs. The Capita Life and Pensions service will use its Enabler infrastructure offering straight through processing links across multiple asset classes.The service will be launched on December 4 and the contract has […]

Severn says FSA moving to fee-only independents

The FSA’s distribution review must recommend that only fee-based advisers are allowed to use the independent label, says ex-FSA retail investment chief David Severn who is also a former chief executive of Aifa.He believes this model is in the FSA’s sights and the time has come to create a distinction between advisers to ensure greater […]

McFall wants bank cash for Xmas fund

Treasury select committee chairman John McFall has written to the British Bankers’ Association calling on all its members to contribute to the Farepak Response Fund, saying the debacle could damage the reputation of the industry.

‘Balance-sheet lenders will look to securitisation’

DB Mortgages managing director Bill Dudgeon predicts that balance-sheet lenders will turn to securitisation in the coming years to remain competitive.Former TMB managing director Dudgeon, who quit HBOS last September to join Deutsche Bank, told the Mortgage Business Expo that he expects more lenders to follow his firm’s business model.BM Solutions says it is considering […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com