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The Life Insurance Market
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So farewell Hector Sants. It’s unfair to blame the man alone, but has there ever been a more disastrous period in the history of Britain’s financial risk-management than his period in charge of it? No matter the mitigating circumstances, could anyone have watched the wrong ball for longer, or made more wrong decisions as to what needed regulatory attention and what didn’t?
It’s perhaps a shame to see the man who has now learned so many lessons, moved on by the modern civil service culture (which is ever more about the profile, pay and conditions of those near the top of it and ever less about the welfare of those it serves), no doubt to learn more lessons, controlling a new field while still not sure what it’s all about. I wanted you to stay Hector, so you could bring experience and mature caution to regulation, instead of the adolescent enthusiasm for change and progress that retail financial services has endured from you and your predecessor.
While the above blurs the macro and micro sides of regulation, the truth is the columnist knows nothing much about the former and 20 odd years more than Hector about the latter. Micro in this context means being concerned with individual consumer outcomes in financial services transactions, though it’s allusion to meddling and box-ticking has also been borne out these last 3 years.
Thus the Conservative plan to split macro and micro makes real sense, if it can be properly managed through, because the culture needed to do either job is totally at odds with the other.
In the case of the micro, or retail side of financial services regulation, the key is the compromise between what works for the seller and the buyer. Focus only on the latter, as the FSA has done since 1987 and, as even that most mighty consumer champion Jeff Prestridge now acknowledges, you make the former ever less able to grow and improve their service. And when the country’s economic health depends on that service being provided, you end up exactly where we are now, with prudent consumer financial behaviours and experienced financial adviser numbers in headlong retreat; and savings ratio's and IFA recruiting at record lows, all as the regulator eats its small pay masters one by one.
But for every loser in life there tends to be a winner, and it’s easy to spot those. Just look where the regulatory touch has been lightest. Debt had it’s (dark) day in the sun, blossoming until the regulator spotted it, and now, just when easy money is economically needed, so the regulator ratchets up the controls. And non-advised selling is the current bean-stalk, with it’s market share in protection predicted to double this year and Peter Hargreaves the living proof that you make profit best by wisely working around the regulator, not with it.
So Hector’s successors then – for the Conservatives envisage 2 of them, face very different futures. Macro-man at the Bank of England has his path laid out, but Micro-man will I expect be told to protect the wider consumer interests, by relaxing a little on the need for perfect outcomes and thus allow again the profitable promotion of savings, pensions and protection if anyone remembers it. Advice is not on that primary list. Hector’s eye for the wrong ball has made the non-advised sellers’ triumph certain. The best advice can hope for is that Hector’s successor will be told to turn RDR around and use it to grow the ranks of the IFA, as the proven best server of consumers' needs. Let us pray...
Tom Baigrie, MD, LifeSearch
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Client's needs: our client called LifeSearch looking for Life Insurance. She had applied previously with other companies and had her premiums increased (known as a 'loading') due to health issues which the insurer deemed to be a risk.
Our recommendation: we applied for cover for the client with Fortis, whose initial premium quote was slightly more expensive than others. However, we knew after talking to their underwriters that they would accept our client at ordinary premium rates and would not load the premium.
Result: we saved the client £35 a month on the premium. Without taking independent advice she would never have been able to achieve these savings.
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It has become custom and practice when buying our car insurance, to visit 2 or 3 sites, generally using price comparison sites, getting a quote or two, and buying the cheapest one available. So long as it covers the basics, we're happy. We can complete online, pay online, job done. The same holds true for other general insurance products too, like Home Insurance.
However, when it comes to buying life insurance online, is it really the cheapest we should buy - after all we want to ensure our families are financially cared for should anything happen.
And can I buy it all online? No, not really. For Life Insurance the details required from you are more thorough, and each insurer may have different questions they may ask of you. Yet should this deter us from having the opportunity to buy end to end online? After all, we can do it for most other insurance products so why not do it for Life Insurance and other protection products.
Our business, LifeSearch, is built around giving valuable and sound advice. But should you have the ability to complete a transaction safely, securely and completely online for Life Insurance? Will you know what you require and have the knowledge to buy it unaided? Add your thoughts on this.
Steve Bone, Ecommerce Director, LifeSearch
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Tom is now back from Egypt, having cycled across the African desert as part of a group raising money for charity during January.
As Tom says: "The team was, with just a few exceptions, very middle aged and male, but we partied hard, cycled harder, rested in the shade of incredible ancient temples and got each other through it. 60 kms a day is no easy ride, especally when you carry a few stone of sub-cutaneous dead weight!"
Visit Tom's just giving page.
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The annual LifeSearch Protection Awards, which is held on March 17th this year, celebrate achievement and excellence in the industry. The shortlist for the 2010 LifeSearch Protection Awards - as voted for by LifeSearch advisers, managers and support – is as follows:
1. Best Service Provider
AXA
Fortis
L&G
2. Most Improved Provider
AEGON
Aviva
Fortis
3. Best Critical Illness Provider
AXA
Bupa
PruProtect
4. Best Income Protection Provider
LV=
Pioneer
Unum Ltd
5. Best New Initiative (sponsored by RED ARC Assured Ltd)
AXA
LV=
L&G
6. Best Underwriting Team (sponsored by Medicals Direct Group)
Aviva
AXA
Fortis
7. Best Individual Impact
Andrew Wibberley, Fortis
Dawn Hennessy, AXA
Debbie Bolton - AEGON
Sarah Felgate – AXA
Naomi Greatorex, AXA
Trevor Head, Fortis
8. Best E-commerce Provider
Fortis
L&G
Royal Liver
9. The Nick Crossman Award for Best Marketing and Communications
Aviva
Bright Grey
Legal & General
10. Best Protection Story
Winner to be announced on the day.
11. Outstanding Protection Director
Bernie Hickman, L&G
Mike Warr, Royal Liver
Richard Verdin, Aviva
12. Best Overall Provider (sponsored by 1st - The Exchange)
AXA
Fortis
Royal Liver
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Aviva have released new research figures that show long term absence from work is on the rise. Almost one in four businesses (23%) claim recent economically difficult times have taken a lasting toll on employee stress levels and have led to an inevitable rise in long term absence rates.
It proves that Income Protection is more relevant than ever for the working person in the UK. Income Protection pays out a tax-free proportion of your income (usually the net income) if you are too ill to work due to illness or disability, including for spinal or mental health issues, such as stress. Additional unemployment cover can be added too.
Consumers should be aware that there are similar policies to Income Protection available which are inferior – often known as PPI, MPPI, ASU – and anyone off work for mental health issues will almost certainly not be able to claim on their policy. With Income protection you can.
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The February 2010 edition of Which?, the magazine that champions important consumer causes, has given a big thumbs up to the quality of financial advice that LifeSearch gives to its clients after mystery shopping several high profile companies.
LifeSearch offer free independent advice for all Asda’s Life Insurance, Critical Illness and Income Protection customers. Asda are the only supermarket who offer this service. Because LifeSearch is independent, Asda customers receive advice on a whole range of products from the full spectrum of insurers. They are not tied to one company as the other supermarkets are tied.
The Which? article on page 24 says: "Asda's response was perfect but Tesco shocked our undercover researchers with its qualification process".
"Asda by contrast, gave a textbook answer. Unlike other supermarkets, all of which have direct ties with just one insurance company Asda refers callers to independent financial advisers at LifeSearch. Its adviser correctly told our researcher that he probably didn't need life insurance as he has no dependents, mortgage or significant debts, but that he should consider income protection or critical illness cover."
"Asda gets it right. If supermarkets are to sell life insurance, they should be encouraged to follow Asda's lead and tie up with an independent advice service - such as LifeSearch - to ensure their customers are making the right decisions."
Good quality Life Insurance advice is crucial yet few people have access to it. Asda’s decision to give its customers access to independent advice ensures that the man on the street is able to receive the same guidance when buying insurance that was previously the preserve of the few.
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Posted by @
12:31 PM, February 08
Well done! Sales without advice or sales on a limited market basis is simply not good enough and your example with ASDA serves as proof that protection can be provided to the mass market without the need to cut corners or compromise on advice and service.
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