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Has protection turned a corner?

Positive sales data has excited the industry but the challenge now is to carry the momentum into 2018

Umbrella-Rain-Businessman-Protection-700.jpgThe protection industry can start the year with a smile. The latest sales figures from both Iress and Equifax Touchstone show new business is up.

Equifax Touchstone reported that protection sales for Q2 2017 had reached a five-year high at 147.1m. Its Q3 statistics go further, with overall growth at over £149m and sales up around £10m compared with Q3 2016. 

Iress figures tell a similar story. Between January to November, it recorded 565,000 protection new business applications compared to 508,000 over the same period in 2016: an overall increase of just over 10 per cent.

So what is driving this growth in sales and how can the industry carry the momentum into 2018? 

Banks and advisers 

Drewberry director Tom Conner says the fall and stagnation that characterised protection sales over the previous five years or so was partly the result of the banks pulling out of insurance sales after the PPI scandal, the financial crisis and RDR.

“Banks now seem to have regained some appetite to conduct this business, so it is natural that protection sales would rise,” he says.

Conner also believes pension reform has encouraged more people to seek advice. “Any decent adviser will identify protection needs during that advice process. Over the last couple of years, networks have also been doing a lot of work to increase protection sales among their advisers.”

How to encourage engagement with protection

Cavendish Ware associate director Roy McLoughlin says more advisers, not just protection specialists, are engaging with the idea that protection should be at the heart of all advice.

“An increased level of awareness has arisen in income protection, underpinned no doubt by the Seven Families campaign,” he says. He adds that pensions freedoms have inevitably raised the subject of death benefits, which will naturally lead to a protection discussion. 

Industry action and innovation

Commentators say better communication of claims paid and more positive media coverage has also helped improve sales. However, a big factor is technology, which has improved the underwriting and buying process.

Equifax Touchstone account director Chris Park says: “The dominant players in the protection market – Aviva and Legal & General – have very slick underwriting systems and new players are providing technology for smaller insurers to have slick underwriting too. In the adviser space, some intermediaries are just selling protection online.”

Iress executive general manager (commercial) Dave Miller says: “We’re certainly seeing greater use of technology enabling better processing and more accurate quotes. What we see in the increased sales figures is technology making it easier for advisers to source products and with more certainty, clients will pay for cover there and then.”

Scottish Widows protection specialist Johnny Timpson thinks increasing consumer awareness of economic uncertainty has played a part.

“People are realising they can no longer rely solely on the state to provide a financial safety net in a crisis. This shift in consumer awareness coincides with concerted industry action to improve the perception and reality of protection claims and support service outcomes,” he says. 

Protection brief: How advisers can cover for cancer

Royal London proposition lead Jennifer Gilchrist has noticed more innovation leading to increased access to protection. She highlights streamlined underwriting models, shortened medical questionnaires and “buy now” propositions that are making the process easier for advisers and clients.

Marketing campaigns from firms such as Vitality and Royal London, and product development, are other potential contributing factors to positive sales.

Lifesearch life office relationship director Emma Thomson says: “Product developments have encouraged growth; Royal London and The Exeter have both launched specialist products to help attract customers who have struggled to find cover due to health issues. Additional benefits have made products more tangible and better value for money, such as LV=’s Remote GP service and British Friendly’s Managed Benefits, which provide a whole host of extras to policyholders,” she says.

Continuing the momentum

While the protection industry is excited by the sales figures, it knows it cannot rest on its laurels. Legal & General director, intermediary, Craig Brown points out it is the collective duty of advisers and providers to raise awareness among consumers.

Protection Watch: Reducing complexity and outsourcing to advisers

Gilchrist thinks continuing product and service development will encourage the take up of cover.

“The industry recognises that the one-size-fits-all methodology doesn’t work anymore. Advisers are looking for more customisation and consumers are looking for the ability to personalise protection to make it relevant to them,” she says.

“I think we will see more propositions come to market which are tailored to need: for example, diabetes life cover. There are other opportunities with further potential to grow the market, such as workplace distribution, protection propositions for the self-employed and targeting those in rented homes who will have limited exposure to life insurance.”

Iress’ Miller adds the industry should build on Seven Families. “We need to find the next initiative to raise the profile and get consumers to recognise how important it is to have the right protection in place.”

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