Martin Werth recently reminded the Protection Review conference that ABI statistics show that new protection premiums in 2011 stood at 56 per cent of their 2003 level in real terms. That is a serious contraction, especially when I believe this includes a lot of cases that have been rebroked as rates have declined.
Linking that sobering thought to the predicted upheavals to be caused by the RDR got me searching for examples from history of free markets that have seen a serious supply side boost with no corresponding demand-led enthusiasm. After all, we are told to expect many more protection advisers after RDR has weeded out the investment and pensions markets. Who are they going to sell things to if ever fewer consumers are buying?
I could not find any success stories but got to thinking about a point that two men I respect enormously have made several times and very emphatically recently. Ian McKenna and Lucian Camp are seldom wrong and both regularly rubbish the old saying that “life insurance is sold, not bought”.
Their point is that consumer behaviours are changing fast and that self-serve is ever-increasingly the norm and that it is silly to expect one market to defy that trend. They can call in support the rapidly growing market share achieved by price comparison sites and those who just give quotes rather than identifying clients’ individual needs and resolving them as an adviser would.
Instinctively I disagree with the two gurus but that is dangerous. A 50-something’s instinct is not worth much in a world changing as fast as this one so I began to scratch around for proof and logic to support a contrary view.
How about this? In the 21st century, marketing has replaced the salesman. If you want to shift your product, you tell the world about it on TV or through banner ads or virally or any old way you can. Or you make sure that it is prominently displayed in supermarkets, online and off, that consumers are likely to visit. All of that is marketing, not selling.
There has been no marketing of protection to speak of since 2003 and sales have almost halved in value. The one product that has been marketed heavily, over-50s cover, is the only one where sales have grown. So I do not think my two gurus would argue if I said that if protection is not marketed, it will not be asked for very much.
And when they learn of the relatively low conversion rate at which online quotations turn into policies sold and families protected, the gurus may well think that some supplementary incentive to buy is needed when the product is one you fervently hope will be a waste of money and one that ever fewer of your peers are buying routinely.
But what if a well-meaning bunch of newly converted salespeople began to ask everyone they can find: “What happens to your family if you die and what happens to you if you are disabled?” I would hold it self-evident that more people will get quotes and buy if challenged about their needs than will buy if that never happens.
So it may be that a boom in people needing to sell protection to live will prove true this updated version of the old saw, “Protection is not much bought unless marketers or salespeople remind consumers that they really need it.”
As there is no chance of much marketing, our best chance as an industry is the salespeople. Go for it.
Tom Baigrie is chief executive of Lifesearch