I’m feeling old just now, recovering from a hip replacement and thus spending too much time watching TV and despairing at the modern world! Apart from a propensity to shout at the TV, another thing old age brings is a longer-term, broader view of life. Well, I hope so. You be the judge.
You could say the world of this column is just three financial services products: life insurance, income protection and critical illness cover, albeit in the hundreds of different forms the free market has them take in order to best fulfil different consumer needs.
Of the three products, IP is, to my mind, and that of all my practitioner friends, the most important. The risk of losing your income through disability is far higher than that of dying before retirement and its consequences can be even more financially devastating to your family. They can’t just mourn you, they have to pay for your care. No one disagrees that CIC is very much third in the hierarchy of need.
This leaves us struggling to explain why the sales of IP lag so far behind those of the other two. I’ve heard many reasons given over the years from those I admire: Money & Pensions Service policy and proposition manager Teresa Fritz thinks it’s because the product is not fit for purpose.
RGAX managing director Europe, Middle East and Africa Richard Verdin thought it was to do with consumers forming alternative coping strategies because they could not imagine themselves incapable in old age. Protection campaigner Peter Le Beau said that it’s because IP has never been marketed positively enough to be understood by consumers as something they even know exists, let alone need.
But I think the reason is more fundamental, it’s that the FCA has caused our market to be structured to disincentivise much of it from ever even mentioning IP.
You see, almost half of those who talk to customers about our three products do not give advice, they do telesales. Their model, reminiscent of those prevailing in the face-to-face market of the 1980s that gave birth to regulation in the first place, needs simple scripts and yes/no decisions they can sell to wavering customers in one intense phone call. Their model is fast and furious, it brooks no detours and IP has no place in that world.
IP has never been marketed positively enough to be understood by consumers
But the telesellers are a big part of our market, currently growing fast as the PPI claims handlers transfer their cold-calling energies into selling LI and CIC. Given the telesellers’ scale of influence and the fact they will never promote IP, the product will never become mainstream.
The insurers rely on telesales for much of their new business so will run scared of promoting the market reform IP needs. This means it is left up to the regulator. For, as I see it, IP can only become as popular as the other two if the telesellers
were to convert their model to one that seeks to do its best for its customers, not just make money out of them. Or to put it another way, to become advisers.
Tom Baigrie is chief executive of LifeSearch and a founder member of the Protection Distributors Group
Follow him on Twitter @TomBaigrie