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Tony Mudd: Advisers are stifling protection innovation

The biggest reason new concepts are not being brought to market is a lack of confidence that advisers will change their behaviour.

Having started life in the financial services industry as a clerk for one of the largest life assurance companies in the UK, protection has always been my first love. Unfortunately, it only takes a cursory glance at Royal London’s recent State of the Protection Nation report to conclude the UK public does not share my feelings.

Of course, this could be down to the fact that protection – whether life assurance, critical illness or income protection – is not exactly an aspirational purchase. Let’s be honest, there are a great deal more interesting and, dare I say it, sexy financial products out there.

The likes of Isas, pensions and so on are all undertaken with a view to enhancing the client or their family’s future. Protection represents the one product a client hopes never to benefit from.

I have no doubt that this is a contributing factor to the under-insurance of individuals in the UK. Why else would:

  • Forty per cent of homeowners with a mortgage have no life cover, with 71 per cent having no critical illness and 81 per cent no income protection?
  • Individuals with children under 18 feel they have no need for protection (25 per cent for life cover, 40 per cent for critical illness and 51 per cent for income protection)?
  • Fifty-five per cent of consumers say they could manage without an income for six months and 42 per cent a year, when 18 per cent and 13 per cent respectively only have enough savings for these periods?
  • Twenty-nine per cent of consumers say protection is too expensive, while not having any idea of the costs?

But if we really want to understand the reason for this, perhaps we should take a closer look at the relevant parties: clients, providers and advisers. When it comes to clients, I have never been convinced by the often-quoted objections of “it will not happen to me” – this is, after all, easy to disprove – and “insurance companies won’t pay out” (this being patently untrue as claims statistics will bear out).

As for providers, the UK offers some of the most competitive premium rates to be found anywhere in the world, combined with a breadth of products that should meet most client requirements.

A number of commentators, including me, have criticised providers in the past for a lack of innovation; shaving a bit off life assurance rates and adding critical illnesses that no one had ever heard of, never mind claimed on, at one point being their limit.

However, this is no longer the case. Indeed, innovation has come in myriad forms:

  • A comprehensive range of added benefits;
  • Premium discounts for leading a healthy lifestyle;
  • Limiting critical illness coverage to make the contract more affordable;
  • A form of critical illness with relevant life plans;
  • Pre-payment of the sum assured on a whole-of-life in the event of a care need.

There are others but I would suggest the industry would have introduced more innovations if it was not for the last relevant party: advisers.

The biggest reason for providers choosing not to bring new concepts to market is a lack of confidence that advisers will change their behaviour; that they will embrace new ideas, identify clients for whom they are suitable and have conversations that may lead to a sale.

The irony is that the development of new products does lead to new opportunities in respect of existing clients for whom traditional products may not have been previously appropriate or desirable.

Alternatively, they could represent a different opportunity where protection may previously have not been considered.

Protection may not be aspirational for clients, but it should be for advisers.

Advisers know the importance, value and uniqueness of protection when it comes to safeguarding their clients’ financial goals.

If a change of behaviour is required, however difficult or uncomfortable it may be, it should be embraced first and foremost by advisers for their benefit and their clients’.

Tony Mudd is the divisional director for development and technical consultancy at St James’s Place



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. An intelligent and comprehensive article. The author’s perception of the adviser mindset is exactly correct. Part of the problem is conducting the sales process on the internet. Advisers need to see their clients at home and make the sale to the other spouse in the equation as well as siblings,who will benefit. Perhaps, an attitude to the risk of being incapacitated or dead should be applied alongside the industry standard Dynamic Planner Capacity for loss.

  2. The article makes no mention of existing competitive life assurance and death benefits provided by employers pension schemes, wondered why not?

  3. Good article Tony. I mentioned this at the last Protection Review… in order to change the behaviour of advisers towards protection, one of the key things that needs to change is the remuneration model.

    A large number of advisers shy away from protection advice as they see no value in it when compared to investment and pensions advice, particularly when the hassle of getting clients underwritten can undermine their client relationship.

    That said, if insurers were to pay level commission instead, it would give advisers the ongoing revenue stream/incentive that they are used to with other areas of advice and might just make that initial hassle easier to overcome.

  4. Andrew Cartlidge 25th April 2019 at 4:03 pm

    Protection products at their best are simple in terms of (a) what they cost, (b) what they provide and (c)in their application processes. ‘Keep it simple’ (KIS)was for decades the mantra for successful life assurance sales. So-called ‘innovation’ has resulted in incomprehensible application booklets running to 20 + pages in too many cases. Customers are rightly suspicious of ‘reviewable’ premium rates, whilst advisers have forgotten how to conduct basic ‘needs analysis’, which would ensure clients were adequately insured against all risks – rather than given what they say they ‘want’. Underwriting with most insurers – for all but the simplest cases – has become a protracted nightmarish experience, too often presided over by amateurs, which deters advisers and customers alike.

  5. Life Insurance was the bedrock for the old “Home Insurance Companies” but is very much a neglected product for today’s more sophisticated advisers. It is not safe to just rely on employer benefits, lose your job and you lose your benefits. SJP does not encourage sales of protection products preferring single premium investment products far more. Sound financial advice should always include a full analysis of protection needs

  6. Covering a client’s protection needs is mandatory in my mind and compliance management should be asking for evidence that the adviser has offered all options to their clients. The lazy adviser who is afraid of asking for premiums will never change. If a fact find has been completed,the adviser should be duty bound to provide a costed solution to address client needs. What if something happens post-recommendation and protection needs have not been covered? The apathy towards protection is pathetic but strangely enough,pays well!

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