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Protection profusion

When Scottish Provident introduced its self assurance product in 1997 it was exactly what IFAs and clients had been waiting for, earning it an enviable market position it still holds.

Four years later a ring of other menu-based protection products is flourishing around it, with several major providers already challenging its market share after a series of highprofile launches this year.

The competition can only get more intense with Scottish Life, Norwich Union and Standard Life all coming to the market with protection menu propositions in the coming months.

ScotProv head of protection product development Nick Kirwan remains undaunted by the swelling ranks of protection providers, believing it stimulates the sector. Kirwan says: “What we have seen is some &#39me too&#39 products coming into the market. People are aspiring to be where Scottish Provident was years ago.

“Having new entrants come in is something that pushes the market on. It grows the market, drives innovation and is good for competition.”

That competition led to ScotProv cutting its protection premiums across the board in September in a move to win back customers. But Kirwan maintains that while its share of the market may go down as new providers enter the market, the amount of business it writes need not decline.

Kirwan says: “We repriced the product to bring ourselves back in line with market changes. Doing that has helped us back to where we want to be and last week&#39s sales were well ahead of sales for the same week last year.”

The departure of several high-profile staff members from ScotProv to Scottish Life led to a public spat. When former ScotProv marketing and business development head David Robinson was followed from ScotLife by former head of product marketing Roger Edwards, ScotProv parent Abbey National warned Scottish Life parent Royal London against poaching more staff.

ScotLife is looking to broaden its product range, particularly with the pressure on its IFA distribution channel caused by the 1 per cent price cap. It is clearly hoping that the winning team from ScotProv can produce similar results for them when they launch their own product, due in the middle of next year.

ScotLife chairman Brian Duffin believes there is scope for development of the post-retirement protection market in particular. He says: “There has been a gap in our range of protection products. Post-retirement is a difficult area to do business in because of the lack of reliable data but this is an area where our strong pension expertise will stand us in good stead.”

But coming to a market with so many new entrants vying for custom will mean ScotLife will have to do something distinctive to get a toe-hold. Scottish Life New Products Business head of products Roger Edwards says: “Scottish Life is giving the team the opportunity to set up a standalone business. We have not got market share to defend and therefore have the ability to explore new concepts.

“But we have got to strike the right balance doing something radical and giving customers and IFAs what they want now. We want to produce something that will take protection to the next stage, but there is a lot of thinking to do – the team is only on day 21.”

Standard Life are at a similar development stage with their product. Marketing development manager Gerry War-ner is aware that in a crowded market, and the ease with which customers can compare prices, the design of the product package will be crucial.

Warner says: “The question is how many products to combine. You could package almost any combination of protection packages and we are looking at the menu approach combining protection with an individual pension.”

The menu versus standalone products debate will continue, with some offerings accused of introducing less than best-of-breed products. But it looks like all the new entrants will follow the menu approach, as customers like the simplicity of having one set of forms and the idea of a discount for buying more than one product from the provider.

The gradual erosion of the endowment market has clearly been one of the main drivers in the growth in the protection market. Bull market returns over recent years have seen providers, intermediaries and consumers focusing on wealth generation rather than protection. But the squeeze on pension commission post-stakeholder has pushed IFAs to think back to an area they had neglected.

Edwards says: “Erosion of income with the 1 per cent price cap has meant that life companies are looking back towards their roots. Protection is the reason life insurance companies came about in the first place. Protection is that real sound solid foundation everyone needs.”

Friends Provident product manager Mike Turner agrees that demand will continue to grow. Turner says: “You either die too soon, live too long or get incapacitated in between. The basic financial protection needs have not changed, but as we all become more affluent there is more to protect and less State cover.”


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