I wonder if the leaders of the various providers which depend chiefly on advised business are in accord with the Association of British Insurers’ stance in recommending that the retail distribution review abolish initial commission?
The remaining rump of independent advisers might well cope but this change would undoubtedly encouragea return to tied salesforce dominance of the mass and mid-market. Are the many providers which have no plans for direct salesforces happy to cede that market to those that do, when some far-sighted advisers have just worked out how to advise profitably in the area?
It seems that only a powerful minority of the biggest providers yearn for those halcyon tied endowment selling days of old. It is the same minority who, in protection, have asked the FSA to consign term life into the new Icob general insurance sector, where non-advice rules, rather than the FSA’s current intention of placing it with all other financial protection products in a new pure protection category within Icob that requires a higher quality of sales process?
This column will, of course, campaign for the latter. With term life routinely linked to the complexities of critical illness and with the need to improve the quality of term life sales across the board by getting sellers to offer family income benefit, trusts and several other vital bits of guidance, the “GI is OK” approach will cause yet more consumer detriment.
The key consumer detriment in protection is that we do not sell enough of it. It is here that a new commercial argument against the current behaviour of non-advised sellers is being proven. The counter-intuitive contention that non-advised selling reduces effective consumer access and widens the protection gap is now supported by shop-floor evidence.
The logic behind this argument has been explained but it now has the support of an actual comparison developing between the behaviours of a group of supermarket shoppers when offered non-advised term life and the behaviour of the same group when offered proper protection advice.
The evidence shows that advice is a lot more effective in achieving the best results for all – more protection sold to more people for longer.
The only drawback is that it costs more to deliver advice and it incurs far greater regulatory risk, so the path is really only for those retailers who genuinely care for their customers.
Notwithstanding the nascent success of this model, the ABI wants to use the Icob review to reduce standards further in the term life market so that its fast growing nonadvised businesses can gain market share without the hindrance of proper risk disclosure to worry uncertain customers.
It keenly follows the motor insurance business model, even though the evidence is mounting that it is causing ongoing overall protection sales decline.
But is it really all the ABI members who are this short-sighted and anti-consumer or just a powerful clique?
Those providers which can see the point of encouraging independent advice to regain the mass market, as one major supermarket is facilitating, should perhaps consider standing up and being counted, at least in their private submissions to the Icob review.
We will present the commercial case for protection advice in the mass market in due course but providers which serve advice should not wait for the commercial case.
The ethical case, that non-advice in financial protection sales causes consumer detriment, is well proven and Lifesearch’s paper on the subject is also available if you doubt that claim. Do get your skates on, good chief executives.
Tom Baigrie is managing director of Lifesearch.