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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.


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