As most people buy protection when they buy a mortgage, we need to move on from piggybacking that market. It will not reach recent highs again in our career spans.
Consumers have no sensitivity as to the impact of disability and illness on their lives. Death’s impact they understand, of course, but not what happens to their dependants.
Distribution is heavily reliant, whether in bank branches, tied agencies or IFA offices, on general practitioner advisers for whom protection is not necessarily a core skill or focus with each client.
In addition, protection manufacturers are almost all parts of bigger conglomerates, long ago seduced away from the complexities of protection profits by the simplicities of the investment and pension markets.
I stopped there rather than go on into the areas of product development, underwriting simplicity and claim handling, as all these issues will surely remain until the level of sales stops its gradual and steady decline. When that happens, investment will return to these areas and they will start to catch up and improve as market forces ratchet up the focus on individual policy differentiation. The key then is to increase sales. Right now, there is, for the first time in a decade, real incentive and effort on the supply side of the market as manufacturing providers and even reinsurers feel the pinch in other markets and come to appreciate the consistent if unexciting returns offered by protection.
Distributors too will look again at the earnings possible in the sector as they address the move to RDR and the diminished returns on their efforts in mortgage, investment and pension markets.
However, if it is not accompanied by its demand-side consumer counterpart, all this new found enthusiasm will do nothing except increase the downward pressure on margins and profit. Someone needs to tell the consumer they need and should want what we sell.
With the demise of the door- to-door salesforce, that must become the preserve of the marketing men. Modern consumers respond to clear marketing messages and then approach trusted sources of help. When those same sources ring them up, they are dismissed as pushy salespeople, so the key to increasing sales is to educate consumers about the potential results of remaining in their present mindset. When governments or NGOs want to achieve this, we see their ads about road safety, smoking and strokes and heed what they tell us in their bleak and accurate way.
That we too can do this is the hope of a campaign which 22 providers and reinsurers are funding (did you know there were that many?) and whose executive committee I am enjoying chairing. We hope to have a plan for a marketing campaign ready for presentation by the end of July.
That plan will need far more serious funding from the 22 and so presenting it to them will be the crunch point. If they buy in – and Friends Provident chief executive officer Trevor Matthews told them at the Protection Review dinner that they really had to – then hard- pushed advisers may just get the tonic we all need.
Tom Baigrie is managing director of Lifesearch