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Tom Baigrie on protection

By the time you read my next column, the unregulated protection market will be no more. No longer will the future of providers and distributors be left to market forces and their own efforts.

>From January 15, the FSA will be the most important factor in whether a protection distributor survives or goes down and out in the way thousands of pension, investment and savings distributors have done since 1987.

The only slight difference is that most of those last three categories migrated into protection and mortgages and now there really is nowhere else to go if you just want to flog some stuff.

>From now on you are, if you are going to give any advice at all, going to have to either cover your rear with paper or preferably do your utmost to do to your client as you would be done by and record why you did it and what was said.

As the FSA gets to grips with the vast field of new sales behaviour that is general insurance, things will change slowly at first but eventually a clear line will be drawn between those who do not advise properly and those who do. The former will have to become non-adviser off the (web) page sales operations or close down. I can’t wait.

Now, would you agree that there are two types of distributors of protection products? The first is driven by an impersonal profit motive, the second by the desire to satisfy a customer’s needs profitably. I reckon the former are the key mass mis-sellers in any historic case you care to mention. Sadly, the paperwork needed to keep them honest drowns most of the latter type.

However, when providers measure issues such as persistency and not taken up rates in the long term, they find that advisers who focus on customer need and their own profit write by far the most profitable business for providers, case by case.

Why is it then that we are only allowed similar sales margins to non-advisers and the sheer bloody dishonest advisers. Why is it that volume chasing still supercedes the drive to quality?I have started asking providers why those distributors whose actions seem likely to damage provider reputations post-regulation get paid the same and more as those who have a long track record of protecting those reputations?Why should best terms be offered to those who deceive customers? (Believe me; if you sell an ASU product dressed up like IP instead of selling IP itself, you are deceiving your customers, whether it is with advice or without).

I am told we have one competitor who reverses the price list on the quote engine and starts from the most expensive and goes down, until they have stitched up the business at the highest achievable price. Now that’s fine when selling carpets in Istanbul but not in when selling life insurance to young families. There is another whose website stresses their independence with a long scroll of famous logos but all their business goes to two providers. And those two think it’ is brilliant, though a moment’s checking would tell them that they were taking business from someone they would never dream of buying from. That’s a quite ridiculously shortsighted attitude from major institutions whose consumer reputation has been battered by each and every new area regulation subjects to scrutiny.

Tom Baigrie is managing director of Lifesearch

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