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Richard Verdin: Aren’t all life premiums ‘loaded’?

Richard-Verdin-MM-Peach-350.jpg

It’s been a while since I wrote regularly for Money Marketing. I now work for a reinsurer, last time I was an insurer, before that an online broker and before that a face-to-face adviser.

What can I say, I get around. However ‘getting around’ has allowed me to understand many perspectives.

I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

So, what is the right price to charge for life insurance?

Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.

Richard Verdin is chief marketing officer, UK & Ireland at RGA

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Hi Richard, I can’t see any justification for a loaded premium. I accept your argument give commission can be sacrificed to bring premiums down, but would anyone disclose to a customer that they’ve increased the premium a little to pay themselves a bit more commission? I don’t think so. They always have the option of asking the customer to pay them more direct if appropriate. Commission has stayed with protection business for tactical reasons. Loaded premiums stink sufficiently to out that in jeopardy, in my opinion. Many advisers don’t, I suspect, know that their panel provider, network or bosses have done a deal. I think they should end.

  2. I wonder how many everyday products would be sold if there was no incentive to sell them? Imagine going into PC World and being asked to pay a fee before the assistant will sell you a computer. There are sites that charge a flat fee for life insurance policies and zero commission. How many advisers are directing their clients to these sites or charging the nominal £25 that it would cost to do it themselves? Oh wait, there’s no incentive in that, better charge them a fee for your services.

  3. Different distribution models have different costs. So for example a building society selling life protection has a different cost structure than say a whole of market adviser. Thats just the economic model and should be accepted.

    Where the arguement breaks down is when in order to have a position on a panel, a Provider is asked to increase the base premium from a “normal” IFA rate in order to pay a higher commission. The excess commission is then generally skimmed by the network.

    This has to be detrimental for the consumer as there is no evidence that to suggest that they are better advised or serviced under this model. When you add in some of the marketing packages asked for annually, you do wonder if the market has a desire to have all commission banned.

  4. @Paul Macmillan

    Saint Verdin obviously enjoys protected status. My comment, while pithy, was accurate and relevant.

  5. abacus test comment no1 – please ignore

  6. abacus comment no2 – please ignore

    comment started 16:41
    comment finished at 17:04

  7. Abacus comment no3 – please ignore

    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with one participant using the emotive term ‘loaded premiums’.

    So, what is the right price to charge for life insurance?

    Is the right price one that carries no commission, but where the arranger charges a fee? Is it where a low-cost broker routinely sacrifices an amount of commission to reduce the standard IFA price? Is it the standard IFA price or those prices which are sometimes charged through some ‘restricted’ businesses? Is the right price charged by banks or perhaps that charged by insurers when dealing directly with customers?

    Each of the questions above will have some saying yes and others no. The answer of course is that there is no single right price and every example is ‘loaded’, either with a fee, a commission or an expense to support the retailer’s activities.

    Life insurance is taken to market by many different businesses with different models and different expenses in doing so. In the extreme there are some that maintain a high street presence; others an office at home. Some spend large amounts on marketing, to attract new customers to the market; others service clients who are referred to them by other clients. It is also common for different channels to serve different customer groups with different risk profiles.

    So, before any of us decides what is and isn’t ‘the’ right price, postulating it is whichever one we have gravitated to, perhaps we should give full consideration to the wider context and not simply assume that the lowest price available [somewhere] always produces the best outcome for [all] customers. Whilst I can see why some are attracted to such an argument, it can’t possibly be universally true.

    We don’t ‘currently’ have a price regulator, but we do have a regulator who has a fairness agenda and to quote them from a recent thematic review “We want to see a sustainable insurance sector, where firms compete by focusing on service and value as well as price”.

    I don’t think a market which operates with a variety of business models and prices is one that is necessarily broken, however I do think the opposite would be true.
    I recently had a lot of time on my hands (I hate gardening!) so put it to good use travelling to other parts of the world, as well as sight-seeing I observed how other protection markets operate. I also spent time studying the way businesses operate and how humans interact with them. I have reached many conclusions, which I will write about here in the future.

    Before I do that, I would like to cover an issue I know vexes some and occasionally spills out into heated discussions. That subject is ‘premium levels’ – and the fact that there are seemingly many, even for what is our least differentiated product, term life insurance.

    I turn to this subject first because it’s an important one and because I recently engaged in one such discussion with o

  8. abacus test comment 20/02 – please ignore

    started: 11:24
    submitted: 11:49

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