So that makes it plain wrong that those who run financial services, whether from the Treasury, FSA, ABI, or your own business’s board, normally only ever include protection as an afterthought.
Being spared FSA interest is a boon, of course, and my purpose here is not to encourage further regulation or the lazy spread of RDR into protection but rather to challenge those that rule us as to whether they feel any responsibility for the vast gap between the level of income protection and life insurance people should have and the amount they do have?
You see it is their fault. The primary reason for the protection gap is the lie that the welfare state provides an adequate safety net for all but the very least fortunate in society. If the Government held up its hands and said, “Don’t be fooled, the state will not look after you such as to maintain any normal average standard of living,” citizens might take more personal responsibility.
And if the FSA focused on the greatest scandal in financial services – the £2.3 trillion protection gap- rather than picking at all the far less important failures, then perhaps adviser business leaders would demand their advisers addressed protection properly with each client before moving on to the sexier areas of financial planning.
But expecting that corr- ective sequence is silly. The Government could never start the cycle of truth and the FSA is not paid to expose Treasury failings. So the solution needs to be found by us market practitioners.
Swiss Re has provided the fuel for the solution. Its annual report is consistent, gruesomely thorough and unarguable. Protection sales are falling and only the efforts of HSBC with its short-term IP product represent any form of pause in that decline. We owe Swiss Re a real debt for making clear the scale of the disaster Britain risks.
But it cannot provide the spark to ignite that fuel into energy and action to change consumers’ opinion and to galvanise advisers into making protection the first advice point it should be. It needs the whole industry to unite to do that.
Now just there is where I lose you. How can an industry unite? Well, it has. Twenty-two providers and reinsurers have funded the research and development of a consumer marketing campaign designed to disturb consumers into understanding the risks that they face by self-insuring. Aifa, IFAP and the PFS all support the initiative.
The crunch will come in late summer when the marketing plan is put to the 22 funding businesses and they have to approve the budget needed.
That is the key moment when providers will decide whether their future is growth or continued decline.
But perhaps the dreadful state of investment and pension markets means that, in 2010, protection can secure the substantial share of overall marketing spend it needs to turn the corner and become again the central part of consumer psychology it should be.
It will look a relatively profitable business sector just then, so perhaps the provider boards will indeed see the point in going back to being insurance companies. It is time, especially as there is no alternative, bar a continued decline.
Tom Baigrie is managing director of Lifesearch