King: There are four cornerstones by which we judge all protection propositions – product design, pricing, systems and service. All these have to be combined with a healthy dose of common sense. Providers have to make it as easy as possible for advisers and their clients to do business with them, otherwise the business will go elsewhere. The protection arena has become a very efficient marketplace, particularly with the growth in popularity of the internet, and providers cannot get away with lazy, unattractive offerings.
Ritchie: Good service and admin, guaranteed products, realistic underwriting and female-friendly products not excluding pregnancy. A key area will be the provider’s claims’ history because TV programmes such as Watchdog have already started to pick up on cases where claims have not been paid out.
Chadborn: Customer service is paramount. New and innovative protection products are, of course, essential, as is the need for the continued development of efficient e-business. But providers must underpin these elements with consistently high levels of customer service if they want IFAs’ support.
Do you think as a result of regulation, IFAs will start selling more income protection than criticalillness cover?King: The introduction of regulation is not enough in itself to increase the take-up of income protection products but it is a step in the right direction. Most critical-illness cover is sold as an optional benefit to mortgage-linked life policies and many clients go straight to critical-illness cover and/or MPPI without discussing the need or benefits of traditional income protection with an adviser. Regulation should mean that there will be a more meaningful discussion between adviser and client on the issue of income protection and how best to fulfil the client’s needs.
Ritchie: No. Advisers are already selling more PHI than critical-illness cover because standard practice should dictate that you recommend PHI before critical-illness cover, the reason being that PHI is more valuable as income replacement and more likely to pay out. It is also generally less expensive.
Chadborn: The requirement for all advisers to carry out full fact-finds means that advisers who previously overlooked income protection now have to consider it as part of the protection package for their clients. For many people looking to protect their families and lifestyles, income protection may be more appropriate than criticalillness cover.
In the past, critical-illness cover was often sold as an alternative to IP and this substitution may no longer happen. However, regulation is not going to take away the many stumbling blocks to a sale that have put IFAs and consumers off IP in the past. It is up to providers and advisers to try to work together to ease the barriers to sale that currently exist if income protection sales are to increase.
What new offerings are you excited about and who are the providers to watch in the future?King: The simple fact that we have providers coming back into the market with guaranteed rates is very exciting as it has proved that there is still support for this popular product. Consumers prefer guaranteed rates and they are prepared to pay more for them. In return, reinsurance companies have decided that at current prices, they are prepared to meet demand.
If Royal Liver had delayed their launch, it is likely that they too would have secured guaranteed rates. Prudential are demonstrating innovation in the protection market, and I look forward to seeing their CI offering.
Ritchie: There are not any new products that I am particularly excited about but I am watching Friends Provident and Scottish Provident in the light of the Santander takeover. Will they revert back to their great service in the time before Abbey or fall into the service abyss of so many other protection providers – Friends, at the moment, still offer some of the best protection plans, combining realistic underwriting, great admin and good claims’ handling.
Chadborn: More providers offering guaranteed critical-illness cover rates is an excellent boost for the protection market. Although reviewable rates have become more popular with customers as guaranteed rates have inc-reased in price, there is still a huge market for the additional reassurance of the consistent price that guarantees offer. As to providers to watch in the future, I am always interested in new providers entering the market but they will take a while to find their feet. I think Bright Grey will come into its own in 2005.
With regulation just around the corner, do you think that advisers are ready to sell protection next year?King: There is no concrete information available to determine if there is a gap between the number of advisers currently working in the protection market and the number who have applied for authorisation after January 2005. Industry estimates vary wildly but some providers have taken the step of mailing advisers to warn them of impending regulation, indicating that they are concerned about a general lack of awareness. The simple truth is that advisers will not be able to trade illegally as providers will not accept new business from an adviser unless they can provide proof of their newly regulated status.
Ritchie: I personally do not know of any advisers who are not already set up as regul-ated operations but I suspect that those that have not made the changes already will use this an excuse to leave the industry.
Chadborn: I am quite concerned that there are still some advisers who have not understood what regulation will require of them and will just find that they are unable to place business on January 14. Networks and providers have done a lot to try and educate people but there was so much unintelligible information pumped out to advisers and networks from the FSA that it is not surprising that some people have given up and are maybe burying their heads in the sand.
How has the introduction of online new business processing changed the way that advisers do business with their clients?King: Immensely. Time-consuming processes have been eliminated and we are starting to see the benefits of true end-to-end processing with some providers. IFA websites/back-office systems, portals and providers are now able to link seamlessly into each other which means we are able to do a lot more for our clients in less time. For example, from new enquiry through to completed application, acceptance terms and even a policy document can now take as little as 20 minutes, all transacted without meeting the client, without exchanging any paper with them and even without a signature.
Ritchie: It has increased my workload. We still have to get clients to fill in online submission forms and then we enter the data on to the computer systems. If it is a clean case, then we may get the policy on risk quicker but it increases our costs which in the end have to be passed on to the client.
Chadborn: Financial services in 2004 are as much about access as product. The internet has opened up possibilities for advisers that could have only been imagined a few years ago. In my everyday work, I now have immediate access to online quotes applying online and our support staff can check commission and cases that are in transit with providers. What is even better is that it is 24/7 so does not close at 5pm. The real benefit of all of these things is that the internet really increases the time an adviser has to give advice to clients.
Jason King, managing director, Life Policies DirectPeter Chadborn, principal, Chadborn Baker & KearleKaren Ritchie, IFA,Finance 4 Women