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Tom Baigrie on protection

I have recently been explaining to the industry why I believe regulation will eventually stop families protecting themselves and that execution-only protection sales are a problem the FSA should seek to address in the knowledge that it is the one part of our market it does not feel responsible for yet.

As we speak to more than 2,000 consumers a week, we know that only a tiny percentage of them have ever heard of family income benefit and that only a minority understand the current low level of net income yield from a capital lump sum.

In other words, many people think that a policy for £100,000 will protect a young family against the death of a breadwinner, when all it will do is create an opportunity for an investment adviser and the probable loss of equivalent state benefits.

So, if you do not know the best way to arrange family cover and you do not know how much cover you need, all you might be clear about is how long you need it for.

In practice, though, many customers need advice to get this right too. This is not because consumers are fools, it is because protection issues are much more complex once you begin to understand a little about them.

When Lifesearch first started, I met many people who told me I was in a sector that was, and should be, commoditised. Fewer think that way now but among consumers there is still a perception that it really is all about price and that all pol-icies are exactly the same.

The execution-only providers and supermarkets encourage this belief because it profits them to do so. I very much believe this applies to the world of pure life protection and it is absolutely screamingly obvious that it applies in the world of critical-illness cover and income protection.

Our recent press release attacking the execution-only sector for encouraging churning in the critical-illness market was met with the response that, because they are execution-only providers, they are not responsible for the decision and that customers will be able to make their own assessment. We will be drawing this to the FSA&#39s attention. Except the FSA does not care about execution only. Not yet.

LifeSearch believes advice is vital in arranging family protection and it is something that should be more actively promoted. But right now, big-brand businesses can profit from the fallacy that consumers can buy policies just as well off the shelf. This is an utter fallacy because the effects of a mistake are potentially disastrous.

When choosing a current account or a brand of baked beans, the differences are obvious, the product is universally understood and the inconvenience and cost are negligible if you make the wrong choice. In the protection world, unless consumers know their way around initials such as CI, FIB, LTA, DTA, PHI, MPPI, MPA, PTA and ASU, they are very unlikely to make the right buying decision for their unique and individual personal and family circumstances.

I am keen to start a debate in the industry regarding this area and would love you to reply, particularly if you disagree.

Tom Baigrie is managing director of Lifesearch

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