CWC Research believes the protection market is “gently dying” and has warned that distribution and processes need to change dramatically if the market is to improve after the RDR.
The consultancy firm carried out 100 in-depth interviews with advisers, including 17 chief executives of big IFA firms, to examine their views on how profitable protection is, the current state of the protection market and the impact of the RDR on protection sales.
It found advisers are expecting that protection business will be key after the RDR. Over half of the firms interviewed said they are likely to offer restricted rather than independent advice.
But it also found that protection distribution is largely ineffective, as advisers have shifted more towards the wealth management sector. Advisers who do sell protection were found to often lack the appropriate product knowledge.
The research also found that application processes are inefficient, with half of applications completed on paper and then put on to systems.
CWC Research managing director Clive Waller says: “At the moment, the protection market is gently dying. That may be an exaggeration but it is going downhill. There has to be change and the change will have to be quite significant.”
Waller believes as more advisers move to offer restricted advice services, new distribution structures will emerge which will see insurers and larger distributors working together on boosting the protection market.
He says: “The research is saying advisers are going to look to protection for an income, the thought process then goes how are you going to restructure that. What I hope we will see is insurers and distributors partnering to major on protection.”
He adds that other avenues for increasing the protection market include simpler products with simpler underwriting and for the industry to invest more in TV advertising.
Le Beau Visage managing director Peter Le Beau says: “Unfortunately, in some respects, the knowledge of protection among some advisers is quite lacking. There is a big knowledge gap and advisers will not just be able to switch on to protection.
“I also think the industry needs to much braver and bolder. We need simple products with a simple message, with a one-page application form. We are light years away from that at the moment.”