Sales diseases seem to take many years to become obvious but in the meantime those trading in the symptomatic way earn very well while a bemused regulator looks on and tries to work out whether tackling the new and thus unproven abuse would be unduly influencing the market. Eventually though, consumer detriment becomes patently obvious and the regulator moves in to cure the fever as more and more consumers start to complain that they are suffering.
The symptoms are all apparent right now. In a currently small corner of the market, consumer demand is there but ignorance is the norm. New players enter the market from other broken markets in search of the commission available. They bring the hard-line sales tactics that are their key to success. The resulting many small start-ups and one or two bigger firms are all developing a reputation for sharp practice and boast ambitious growth plans. The big institutions are following in fast.
It should sound familiar, the sequence is eerily similar to that seen in pension transfers, endowments, payment protection insurance and sub-prime mortgages.
Just like in those cases, the result is again a rapid increase in a new version of old and proper business activity, the new one done through a regulatory gap, and done hard and fast and with a sharp increase in churn activity and lapsing policies.
The new game on the rough edge of town is the telephonebased selling of Icob products without advice. It sounds boring but it carries within it the seed of serious reputational damage to us all. It will take time for the consumer detriment to manifest itself, but when it does, the suffering consumers will be seriously ill or recently bereaved, so we can expect no media mercy.
A major insurer told me today that this sales method will continue its current 200 per cent plus annual growth in market share until at least a third of all protection sales are made through this channel.
The trick is simplicity itself and a bastardisation of best practice – you tell the client that you will not advise them but you then impart all information that promotes a sale and none that hinders it. You prey on consumers’ half-knowledge with half-truths and, to make a quick churn, you use phrases like, “criticalillness benefit is very expensive but many people choose terminal-illness benefit and XYZ Life have a special deal on now that includes life cover if you apply in May.”
Or, “a joint-life policy costs less than one each and you do not need to bother with those complicated trusts.”
Or, “We do not deal with ABC Life because their claims’ record is not very good.”
To succeed you simply invest in lots of sales training and no technical stuff, other than the jargon needed to impress gullible consumers after a cheap deal. You link up with a few providers to whom you promise vast volume and you flog, flog, flog. And the regulator will not bother you for years yet.
The Financial Ombudsman Service once said that they saw no way that a salesperson could have a telephone conversation with a customer and not give them advice.
It is time the FSA saw that truth and clamped down on non-advised telesales boiler shops. Non-advice should never involve a sales conversation and that means it should be online or not at all.
Tom Baigrie is managing director of Lifesearch