Loyalty over profitability is key to success, according to some IFAs, who stress that persistency levels are a far better indication of business performance than profits.Persistency – the length of time that business remains on a broker’s books – shows the amount of business rebrokered or cancelled. Royal Liver IFA market manager, Andy Milburn says: “About one-fifth of business does not stick in the first three months.” This is often due to buyer’s remorse, where customers decide they do not want any cover or are lured away by a better deal. But many people cancel their cover within a year because they have taken out an inadequate policy, do not understand what it does or cannot afford it. Persistency levels are lowered when customers get a lack of exchange such as receiving a poor level of advice or buying cheap, basic products from supermarkets where they receive no advice. Supermarkets tend to get price-conscious customers initially because they market on cheapness. CBK (Colchester) principal Peter Chadborn says: “Supermarkets are selling life insurance marketed by being cheap. The downside is they are educating people that cheapest is best rather than pointing out the different features.” Lifesearch head of protection strategy Kevin Carr says the big brands have realised that price-based marketing may get them customers but it is not enough to retain them. Chadborn says supermarket products lower persistency levels as consumers move their cover to a supermarket policy to save a few pounds without realising the limits of the policy. CWC Research senior partner Clive Waller says if customers are approached by someone selling life insurance on the street or buy it at the bank as a side-order to their mortgage, they are more likely to cancel it because they cannot remember what they are paying for. Direct Life and Pensions sales and marketing director Richard Verdin says banks have a 50 per cent share of the life market. “If an IFA came across a customer who bought a policy from a bank, they could get them a lower premium or a like-for-like product,” he says. Chadborn says low persistency in supermarkets or banks is understandable but for IFAs it “shows a broker is not identifying customers’ needs or they are churning”. He says low persistency levels suggest brokers are not educating clients on the products they are buying, identifying how much they cost and what they get for their money. Waller says if a client is educated and if brokers choose clients carefully and spend time understanding them, their persistency levels would be 100 per cent. He says: “The worse the sale, the more policy cancellations and lower persistency levels. The better the sale, the better the client understanding and persistency level.” But there are circumstances when brokers need to move people from one cover to another. For example, switching someone to pension term assurance is ethical churning as it benefits the client. Carr says: “As long as they get the right product, at the best price, there are no other issues to consider.” Last week, Association of British Insurers director general Stephen Haddrill said churning was a positive thing in some cases and pointed to other industries where churn was considered to be good for consumers. Carr says: “The cheaper that life cover gets, the harsher the underwriting and fewer people are considered healthy so people will not get the cheap price that is advertised.” Features of life policies can differ from one provider to another, such as the ability to extend or reduce the term of the cover, the option to split cover if a couple separates or the chance to increase cover without underwriting but advisers doubt that these are enough to encourage brokers to churn.