It is too early to be sure, of course, but I wonder if the recent protection price changes, which were mostly price rises of course, have not changed our market a bit for the better?
That thought begs the question as to whether what’s good for the supply side of a market can be good for consumers even if it costs them a bit more. It would be easy to ridicule the very thought, but it seems to me that protection is different to other markets in many ways and this might just be one of them. Though that of course depends on what the market does with its new found improvement.
Let me explain. The first effect that we’ve noticed since the price rises is a reduction in lapses. Policies bought last year cannot now be bought for less this year and that is proving good for margins in protection distribution and manufacturing. The second effect is that our average premium per case has naturally grown a bit, but also that so far at least consumers are not being put off by this at all. One could be cynical and say that they didn’t buy enough when it was cheap and they still aren’t buying enough now that it’s a little less cheap, but they are buying what they did and paying a bit more and thus our margins are a bit better, as will be providers’.
And that’s where the oddly different nature of the protection market comes into it. For unlike other insurance markets protection is barely marketed at all, claims are very rare and claimants are reluctant to tell journalists of their misery and thus the relief protection has brought them.
So the market is to an oddly large degree created by sales peoples’ supply side push, rather than advertising or buyer demand. Don’t get me wrong, there is buy side demand, but it’s nothing like as big as it would be if consumers were truly conscious of the risks they run and that protection can cover these effectively and at very reasonable cost.
My hope is thus that where higher margins arise they might be deployed into greater sales effort, or even education and marketing campaigns that would get consumers to understand their protection needs. And that, as I hope even a consumerist would surely agree, is good for them.
In short, if protection is indeed a good thing that is more sold than bought, as the old saw puts it; then making the sellers better able to communicate effectively is a good thing. The same would be true if those who sell pensions and savings were better able to communicate the horrors of an old-age without either, rather than the marketing field being left open to the pushers of dreams that are the debt sellers.
Notwithstanding recent TV efforts from Aviva, Unum and even a distributor or two, those of us who sell financial responsibility have so lost the consumer’s attention that compulsion is the most talked of solution to a need the free market should be perfectly capable of fulfilling in its entirety. It’s sad that the only truly profitable products in recent memory just now are overpriced active managed investment funds, dubious over 50’s insurance and of course PPI, which became super-profitable only because it was mis-sold; but for us honest Joe’s still dreaming of a 10 per cent profit margin and hoping to use it to encourage consumers to be more financially responsible, the recent price rises might just help us to help them.
Tom Baigrie is chief executive of Lifesearch