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The Life Insurance Market
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We believe far too few consumers have adequate protection in place and, when disability or death strike those without adequate protection in place, they and their families thus suffer avoidable financial hardship and become unnecessarily dependent on the state.
The huge decline in Protection sales has accelerated of late and policy makers should thus seek urgently to remedy it by accelerating across to the protection market those strands of RDR aimed at improving consumer knowledge and increasing and simplifying consumer access to protection advice. Logically that must include increasing the availability of protection advice to consumers.
There are seven key points that must be accepted before any part of the RDR enters the protection market:
1. In a market without investment elements, like Protection, price is totally transparent. This makes adviser bias very clear to any consumer.
2. So the single biggest cause of provider and product bias is lower price.
3. The differences in commission rates between products and providers are small and cause no bias.
4. More advisers entering the protection market will not change any of the above except possibly to increase the sale of more comprehensive policies at higher premiums. This is a desirable consumer benefit.
5. Consumers' reluctance to purchase protection products makes mis-selling impractical.
6. The costs of advice and sale are all incurred at or directly after the point of sale. Commission reflects this fact effectively, and can be clawed back if the policy lapses. The consumer detriment in buying the wrong cover can be corrected at any time. The universal monthly payment structure means that consumers have every opportunity to correct errors or reflect changed circumstances without incurring severe detriment.
7. It is certain that charging fees for protection advice will reduce the sale of protection policies as they will greatly increase the initial cost. This would be genuine consumer detriment caused by the RDR and this risk should outweigh all others.
You can read the full submission here.
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