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Lifesearch: We must stamp out dodgy distributors

There has been a recurring theme in the consumer press in recent weeks – cheap premiums, especially for life insurance, are coming to an end.

As life insurance is the overwhelming protection focus of the public, I will concentrate on that area. The price of a life insurance policy is at a historic low and yet the public rarely seem aware just how inexpensive it is. For a young person in good health, an average-sized policy can be as little as £5 a month.

But the impression has persisted that life insurance is much more expensive than it really is. Consumer misunderstandings are common in protection, such as the public perception on paid claims. Most people do not realise that insurers’ pay rates are over 90 per cent, especially for life insurance. They assume it is much lower.

Yet key messages repeatedly fail to reach many consumers. Price is only one element that consumers need to consider when buying protection and, in many consumer publications, particularly the broadsheets, that message is slowly seeping through.

Too often, consumers have not received the right information (something that is mainly due to the industry’s communication failure) but maybe now the tide is turning.

I have been interested to note the sudden rush of journalist enquiries and resulting articles advising readers of the imminent jump in the price of premiums. If this translates into a rush of protection enquiries, it will present a couple of problems – is the industry geared up to handle and process these applications in time and will these clients be given proper advice on, say, income protection and trusts, or simply pushed through the life cover pipeline?

There are plenty of highquality protection advisers but there are also unscrupulous distributors out there which can damage the public image of the protection industry for years to come.

This is partly the reason why Lifesearch has proposed a distributor’s code of conduct – a set of minimum standards that providers should ensure anyone selling their products adhere to. The image of the industry is at stake and, at a time of rising premiums and falling welfare provisions, that is something that must not be allowed to happen.

The consumer press is advising readers to buy now to avoid price hikes that will inevitably follow from I minus E and the end of gender pricing. This consumer press interest in protection, especially when there is also a focus on product quality and the need for advice, is positive for the industry.

What is important is to ensure that the next messages they receive are not tales of how dodgy distributors have betrayed their trust.

Matt Morris is a senior policy adviser at Lifesearch

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. I fully support Lifesearch’s initiative as continued bad practice will only result in the cold glare of regulatory disapproval.

    Another area where best practice, treating customers fairly and regulatory disapproval walk hand-in-hand is the nefarious practice of clients paying higher premiums because far higher than normal commission payments are negotiated.

    Some networks practice this as does Nationwide Building Society which is tied to L&G.

  2. Good article but I have no sympathy for thos who take out cover via the internet or direct offer campaigns. They need advice on what to do, how much to take, for how long, what type of cover – joint or single, level or increasing, in trust – if so what kind and trustee need to know what their responsibilities are or is cover to be done on life of another. This cannot come from anyone other than adviser. For all the difference in premiums it has to be worth paying for.

  3. Bad practise within any sector of Life Insurance distribution, advised or non-advised, is clearly unhelpful and unwanted and who could possibly argue that the world would be a better place without it. I would also prefer to live in a world where customers were generally more appreciative of the value of good advice and that more customers had access to it. However, I am a realist and believe we need to recognise that customers will not always choose to buy (or be advised) in the way that we believe is ideal.

    Whilst I have much sympathy with many of the points that Matt makes in this article I think it is important to take a step back and consider how this on-going debate might be being viewed or portrayed in the wider public domain. Will the public, or those that represent them, really take the time to understand the issues or will they take the easy route and focus on the negative? What would the tabloid headline be? “Life insurance – make sure you get some good quality advise” or “Life Insurance – watch out for the dodgy distributors”?. I suspect that sadly we all accept it will be the latter and that the result will be less folk covered with the excellent products our industry provides as the headline just puts everyone off.

    My suggested way forward would be to use our energy positively – to sell the benefits of what we do well rather than point out to the public the aspects of what a few do badly. If you were the CEO of British Airways with a better safety record than some other airline would you try to sell more flights by telling the public they had more chance of crashing with the opposition? Or might that just make your customers worry about flying altogether and just stay at home?

  4. BeenThereDoneThat 28th March 2012 at 12:09 am

    More pompous twaddle from the company who think they are God’s gift to the industry, and have the divine right to preach to the adviser profession. Get off your high horse and get some time in first young man. When you have personally paid out lots of death claims to widows, and your personal clients’ critical illness claims are well into double figures, I might listen to what you have to say. Oops, I forgot, you don’t have personal clients do you – they’re just voices on the end of a telephone.

  5. This coming from the same firm that were in the press not so long ago as one of their advisers were told NOT to offer a customer a cheaper product because they will get claw-back on the higher priced product they sold them before?

  6. Thanks for the constructive comments. Just a couple of responses to the last two.

    Anonymous – we don’t tell our advisers not to sell cheaper premiums, that simply incorrect. However, do you realise there are big question marks over advisers who rebroke CIC policies because the definitions are tighter these days? Finding a cheaper policy that’s like-for-like is not always in the consumer interest.

    BeenThereDoneThat – with that kind of username, I fear it’s you who leaves yourself open to a charge of pomposity. I have dealt with CI and death claims personally and, more relevantly, so has LifeSearch, on a scale that probably wouldn’t be possible with face-to-face advice, which we do offer through the Baigrie Davies wing of the business. Is there something specific you disagree with in the code of conduct proposals? I would be genuinely interested in hearing constructive criticism but these kinds of comments make you sound rather jaded. I’d also ask why you think trying to change the industry for the better is pompous? If our proposals are wrong then we’ll change and adapt them, but the only pompous act would be simply not to bother trying to improve areas we believe cause harm. You don’t need to have been in the industry for decades before you attempt that.

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