At last month’s Protection Review conference, chief executive Kevin Carr identified just 3 per cent of mortgage advisers think the protection industry is working well for them. This is a damning indictment of the current state of the life assurance industry.
A small number of highly professional specialist protection advisers, who understand their products inside out, do a great job of delivering advice on them. These firms are not shy about saying how the market should evolve and because of the volume of business they are highly influential in defining the direction of change.
Yet the volume of protection cover sold continues to fall year on year. This is politely called the protection gap, although I think the protection crisis would be more accurate.
The Protection Review research finds insurers are failing to listen to a much larger group of distributors, mortgage advisers and wealth managers who sell protection as an addition to their core services. This community is turning away from the life assurance market in droves. Protection adviser Pete Chadborn eloquently articulated the reasons for this during the recent Money Marketing Wired broadcast on protection (this can be found at: http://www.moneymarketing.co.uk/mm-wired/ ).
Chadborn made it clear life assurance has become too complex and too time-consuming for most mainstream advisers. These advisers need to be able to compare products and product information far more easily. They also need clearer, more efficient new business and underwriting services.
If an adviser takes the time to persuade the client to take life cover, they need to know the contract will proceed quickly at the premium quoted. Pension freedoms mean there is an unparalleled demand for advice. If protection cover is just too hard to set up, advisers will focus on the business areas they can conduct quickly and efficiently. Post-RDR, advisers have a far clearer understanding of where they make profit and the protection market just has not kept pace with this change.
So what do we need to do to fix the broken protection industry? First, a fundamental change in attitude. A good start would be banning the defeatist mantra that life assurance has to be sold not bought. This is essentially saying the products are such rubbish that no sane consumer would buy them without someone twisting their arm to do so. Not only is this incredibly negative thinking, it is also not true. Almost everyone needs life assurance of some kind.
As an industry we must build products that are more attractive and easier to understand as well as processes that are far more customer friendly. We also need to provide existing life assurance customers with more information on their products on a regular basis. This is something major protection advisers have been calling for for many years, yet the message falls on deaf ears, with insurers inevitably citing legacy systems and costs as a reason for not investing in the 21st-century services customers have every right to expect.
If we do not tell customers regularly about the benefits of their life cover, how can we expect people to value it? The protection industry must engage with the Treasury to ensure the forthcoming pension dashboard can also deliver consumers with an equal level of information on their life assurance. If we do not, protection will fall further down consumers’ list of priorities.
At the same time, we must make it far easier for consumers and advisers to be able to understand and compare the features and benefits of different life products. Insurers say they want to sell on quality yet their investment in tools to compare anything other than price is almost non-existent.
Companies like UnderwriteMe and iPipeline are taking major steps forward in delivering a better new business process to consumers and making “buy now” pricing readily available. That said, a small number of the largest insurers are fiercely resisting this major consumer benefit for selfish reasons and this must change.
The discussion around addressing the protection gap invariably brings a sense of déjà vu. Einstein’s definition of insanity is doing the same thing repeatedly and expecting the results to change. Sadly, that is life assurance marketing today. Implementing the changes outlined above would be a great start in doing things differently.
Ian McKenna is director of the Finance & Technology Research Centre