View more on these topics

Quality control

A resurgence of interest in protection insurance is one of a few positive outcomes of the present economic disaster. One other instance being an increased scrutiny of those who normally scrutinise us.

Tom Baigrie’s initiative, aimed at increasing consumer awareness and, hopefully, greater responsibility and ultimately self-provision, deserves to succeed and surely will, although it will also require the involvement and support of advisers. However, to buttress this enterprise, we need to see greater creativity from the product providers.

Too often, I am told by a provider that it has increased the number of its critical-illness conditions or that it has reduced its rates fractionally. Now these adjustments are perfectly acceptable and are not to be decried but they are merely repositioning exercises designed to increase that provider’s share of the cake. What we need is a bigger cake.

Tom Baigrie’s proposal aims to achieve this result but the providers must sit up and give greater thought to the two main determinants that stimulate consumer interest. The first of these is glaringly obvious yet is frequently absent from the product design, namely, an insurance that actually provides the type of protection that the consumer requires. The second is an uncomplicated buying process that does not confuse, drag on or otherwise scare off would-be purchasers.

There are many examples of plans being made available which simply do not cut it when placed under the microscope. One is the income protection plan that fails to provide an own-occupation claim definition. Increasingly, we see higher-risk occupations being offered a work task or an activity-based definition and these are variable in their ability to provide the necessary peace of mind. Another example is the MPPI or PPI plan which insists on joining redundancy and sickness cover together regardless of whether the applicant might want only one of the components.

Income protection and critical-illness plans suffer from the accusation of an overly long application process. One reason for the success of the PPI peddler is the ease with which the plan can be arranged. Tele-underwriting is a move in the right direction, although I have seen the process disrupted by failures in communication between interviewer and applicant. Another problem which persists is the generic application form where somebody applying for a simple short-term life insurance is obliged to answer a multitude of questions which are really intended for critical-illness and income protection applicants.

Recently, a growing number of insurers have been asking specialist protection advisers for their views and ideas during the design process. This is admirable because no amount of market research can provide better information than the views of practising advisers. Of course, this is a point that many of us have been trying, albeit unsuccessfully, to get across to the FSA.

Let us put an end to the “we’ve got one too” syndrome, that lazy approach that some insurers have taken on when attempting to revitalise their tired old products. Let us also get away from the price war that two or three companies seem determined to perpetuate. Lest they forget, companies which seek to sell on price alone will always be susceptible to future rate reductions.

The industry needs quality products that keep their promise and make the potential purchaser’s route and easy one.


Pointless exercise

Included in Gordon Brown’s article for last week’s Observer was the following comment: “We have got to get the balance right between serving homeowners better and encouraging responsibility in the housing market. We have also asked the Financial Services Authority to look at how in the future we should control new mortgages for more than 100 per cent of house value.”

Corporate bonds – the next bubble to burst?

With cash yields nearing zero investors are looking for somewhere else to park their money. Enter corporate bonds. But with rising default levels and multiple rate cuts forecasted do credit markets really offer such good value on a risk return basis?


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm