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Loyalty for life

The last month has seen Sainsbury’s and Tesco running promotions through their loyalty programmes to promote their life insur-ance but the move has been criticised by some advisers as a gimmick.

New Sainsbury’s life insurance customers who sign up before January 29 will get 5,000 Nectar points worth £25. A new Tesco customer taking out cover before January 8 will earn 2,000 Clubcard points, equal to £20.

CBK principal Peter Chadborn says: “As a consumer, I am automatically suspicious of anything that needs an incentive to sell it but it could be a shrewd move by Tesco and Sainsbury’s.”

Lifesearch policy adviser Matt Morris says: “There could be a negative impact on the idea of life insurance if they buy what is not ideally suited for them. If they are swayed by gimmicks, then they could be buying inappropriately and then they will get a poor view of the industry.”

Neither Tesco nor Sainsbury’s offers advice on protection policies.

Morris says: “It can be considered a gimmick. hey offer something like £20 off your shopping to sign up for life insurance. The problem is they do not offer advice to their customers.”

He believes that advice is crucial and can save money for the client in the long run.

Morris says: “Customers who buy into this, going through an unadvised channel, could be losing out on a very important insurance policy, for example, income protection. It is also sometimes smart to take out two life policies and put them into trust.

“A lot of people buy life insurance that they do not need because they do not seek advice. For example, someone might need just to protect against loss of income as serious illness is more likely than death.”

Bright Grey communication manager Nicki Lundy says: “You should always get financial advice for life insurance, especially since life insurance may not be the best kind for you as an individual.

“If you are not married and do not have children, then you do not have much responsibility besides yourself. You may need another kind of insurance.”

Morris believes many people do not realise the importance of getting advice on life insurance, and warns anyone to seek advice before buying any sort of financial product.

Morris says: “People’s awareness is raised when they seek advice and when they learn about what they need. Protection needs to be promoted but in the right way.

“If people cannot seek advice, then they have no one to complain to. If people have no one to go to for advice, then they will start having a negative image.”

Opinion is divided on whether the life cover deals will pay off for the supermarkets.

Morris says: “Something like this will always attract some customers and I am sure that they know their marketing.”

Lundy says: “This offer could take business from other providers. People should know it is always worth taking advice.”

The other issue for many advisers is that the super-markets are concentrating consumer attention on the price of the insurance.

Chadborn says: “This further commoditises life insurance and detracts from the plan as a whole. It could have a detrimental effect on the consumer. They might think there is nothing left to consider.”

Lundy says: “They are trying to sell life insurance as a commodity and the chances are that this will not increase the number of people who are taking out life insurance. If you are not thinking about it already, it probably will not make them start thinking about it through this.”

Price should be a secondary factor when considering taking out life insurance, according to Morris and Lundy. The important aspects are to concentrate on quality and what is right for an individual.

Morris says: “Anyone who bases their policy on price is always trading on dangerous ground. Someone could end up with a totally inappropriate policy and cannot seek advice about it. It is unfortunate if they buy into it because they get a bit of extra cash.”

Lundy says: “It is only worth buying the cheapest teabag if it is drinkable. It is the same for life insurance.”

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