They say that if you wait long enough, your grandfather’s suit will come back into fashion.There may be some truth in that – take the recent findings by the FSA on the use of statistics. In a review of financial promotions by protection providers, the FSA found there were “unsuitable tactics ranging from scaremongering to unsubstantiated claims and misleading information”. The FSA has raised an important concern but am I imagining things or were there not similar worries in the late 1980s and early 1990s over the scare tactics used by direct salesforces to highlight the need for critical-illness cover? Even then, consumer groups warned about the use of statistics in order to raise awareness of the product. But statistics, used responsibly, have an important role to play in highlighting the protection gap. For many years, salespeople have used statistics and incidence rates to help them explain the need for insurance products, particularly critical-illness and income protection policies. Statistics have been used widely, in a measured way, to persuade clients that they need to address their protection needs and put essential cover in place to protect themselves and their families in the event of a life-changing incident. We, as an industry, have strived to get clarity into the products, with most companies adhering to the ABI statement of best practice on critical illness. But we will need to think again about how best to use incidence rates, as they are still an important part of the message to consum- ers, for whom protection products are not usually seen as a priority purchase. Swiss Re has estimated the protection gap at 2.5trn, demonstrating that many people do not have the right type of cover in place. A recent article in Money Marketing stated that 35 per cent of parents have no life insurance at all and 72 per cent have no critical-illness or income protection cover. The challenge for the industry will be to use statistics in a less confusing manner. Take the incidence rate for cancer, for example. One in three people will develop cancer at some stage during their life but most of these cancers are diagnosed in older lives and would not be covered under the normal duration of standard-term policies. There is also no indication of the severity of these cancers at the time of diagnosis. Some claims under critical-illness policies would not be paid out due to the early stage of the illness. The difficulty for insurers is producing quantifiable numbers of incidents that we would categorically pay out on. In future, we may only be able to say that one in three people will get cancer during their lifetime but we may not pay out on all these incidents. Speaking from personal experience with a close family member who suffers from multiple sclerosis, we should not lose sight of the valuable benefit that these insurance policies can pay to a person who suffers from a critical condition. I know from talking to my family member that he would not feel aggrieved that we, as an industry, use statistics to illustrate a need that someone might have if they were unfortunate enough to suffer a critical condition. I guess he was “fortunate” to have the right type of critical illness, which meant he could claim under his contract. We do need to make sure that we use the correct statistics to inform customers of the potential impact to their lives if they suffer from one of the listed conditions under critical-illness contracts. No one can question that their lives will be significantly affected by the condition they are suffering from. Equally, we need to ensure that the information given to clients is not misleading in any way and highlights the true need for the cover. We share the concern of the FSA that customers should not be led to think that they are covered for something they are not. Clearly, there is an issue with the high rate of decli- ned claims for critical-ill- ness policies although this is not directly attributable to the fact that people think that they are covered for something they are not. There is a lot of confusion which needs to be tackled. There is no doubt we have a problem with consumer confidence in this product and we should do more to reverse this. We need to be careful how we use incidence rates, ensuring that we use them wisely.
F&C have announced Alain Grisay is to take over as CEO from Howard Carter in January 2006. Grisay was appointed deputy chief executive in March 2005 and will be guided by Carter until his formal retirement in March 2006.
Sesame is appointing Paul Rignall as its mortgage product manager, joining from St James’s Place where he was the mortgage marketing manager. Rignall replaces Andy Young who left for TBMC in April 2005. Rignall was responsible for the mortgage and general insurance proposition at SJP. Prior to this, he held several roles at Zurich.He will […]
Fidelity has given investors and advisers returning from their summer holidays a lot to think about by announcing it is to split Anthony Bolton’s giant special situations fund next year.
Loughborough Building Society has withdrawn a mortgage that could have cost it dearly with 10,000 cashbacks being offered to borrowers. The variable rate deal of 6.1 per cent offered 7 per cent cashback up to 10,000 with no early redemption charge on the mortgage. Customers with equity in their homes could haved remortgaged and repaid […]
Last year, worldwide mergers and acquisitions (M&A) rose to an unprecedented $4.7tn, according to Thomson Reuters, a 41 per cent increase over 2014. Anthony Forcione, senior equity analyst at Loomis Sayles, an affiliate of Natixis Global Asset Management, looks at what’s been driving this particular wave of mergers. Click here to view full article: Loomis-Sayles
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