The Life Insurance Market
It’s interesting watching a market turn. One should collect the headlines and indicators and keep them so one can spot the trends faster next time.
Sadly, I’m not talking about the Investment market. Trying to call that turn off the bottom is like trying to catch a falling knife. You look cool if you get it right, but it’s far more likely that you will to lose your fingers. No, the market I’m talking about is the one for protection products. Even if protection is not your thing, you should know that it might become such, because if the banking pain transfers to the real economy and it will, new retail investors and their funds will be hard to bring under management. Already the smaller more flexible IFA businesses are joining the refugee mortgage brokers in causing the insurance quotation portals to enjoy record enquiry levels.
The oldest cliché in protection is that it is sold not bought. The logic is that buying cover is what the marketing men call a ‘distress purchase’, which jargon means that one buys it even though one doesn’t really want to. Who wants to address their own mortality and morbidity and then spend money providing against that which one hope will never happen? Only those who are frightened, feeling the need to be responsible and cautious, and wary of what the world might throw at them. And while that’s just about all of us in Britain today, it still needs a salesperson to turn the need from an impulsive purchase of some life insurance (because that is the only product brand consumers are widely aware of) into something that covers properly against the real risks people face.
The trouble is the salespeople have been off selling other things since the mid 90’s when the threat of AIDS receded and so the genuine protection salesperson is a rarity and distribution capacity across the UK market is at low ebb. Worse, in the interim, while we were all somewhere else, the non advisers and price comparison sites slipped over the border from the general insurance world and became the interested consumer’s first choice of enquiry route. And all they sell is those titchy life insurance policies I mentioned above. But that’s what the bottom of a market looks like; depressing.
So why do I say that it’s turning? Well if you talk to a reinsurer you find them hungry for life premiums, they see our market as far more profitable than many others they tie up their capital in. And if you turn to insurers you find them focusing on protection as never before, perhaps because the writing is on the wall for them as investment businesses and they are turning back to their roots to survive, but the tone of the many meetings I have with providers is far more eager and ambitious than it has ever been. So the supply side of our market is waking up swiftly.
And that IFA quote portal activity surge shows that the demand side is waking up too. And so one can predict (unless investment markets become alluring any time soon, and I am happy to discount that) that many more people will be selling protection in 2009 than were in 2007. Hopefully providers will insist that they know what advisers are doing before they grant agencies and hopefully the ICOBS team at the FSA will knock the rubbish out of the market from the start of its growth rather than after it when bad practice tends to surface.
But the key to sustained growth will be provided, as it always is, by capital. The non bancassurer distribution sector in protection is ridiculously fragmented and under-capitalised and little of it focuses on protection, so the opportunities for growth abound, but this will take time I fear, as there are very few specialist protection advisers and those that do exist, like mine, are not so much salespeople as expert fulfillment houses for those who have worked out they need something. What we need to complete the turn around is either more face to face sellers exposing consumer need, or much more and better marketing. The former seems a very limited opportunity so marketing must be the key driver needed. But it too is a long shot one, because the capital needed to seize this opportunity can only come from providers and very few of these are genuinely lead by protection people.
For my part I am doing my bit to encourage others to follow AXA’s brave lead (do get down to a Central line tube fast to see it) and the next time I’ll be telling you how the marketing campaign development I have been going on about is progressing. I’m rather excited!
This article was published in Money Marketing.
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