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The Life Insurance Market
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Lloyds has said that it has withdrawn from the PPI market because it no longer makes business sense to provide these products bearing in mind recent, and possible future, regulation of the product.
It is very positive to hear that Lloyds will now focus on Income Protection, Critical Illness and Life Insurance to help meet their customers’ protection needs.
Simply leaving consumers unprotected would be the worst possible outcome, but if we are now to see a move away from PPI and TOWARDS better forms of Protection, such as Income Protection, that is positive for consumers and for the industry.
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Posted by @
11:59 AM, August 02
A major step in the right direction in my view. Considering the weight of mis-selling complaints on PPI and it's inferior rank against full IP, I wonder if insurers will really step up to the mark and put into a place a new form of Unemployment only cover that complements IP? Cost prohibitive maybe, but the industry should provide cover for what people need, not what insurers WANT to provide.
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Posted by @
08:15 AM, August 02
And about time too, how many have been suckered into this and paid fortunes. TIme for the rest of the UK's banks to take action and acrap this now!
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Posted by @
04:41 PM, July 28
I wonder if the FSA leant on ScWids at all, and if so whether they are leaning on the smaller online fry who have colonised the Income Protection keywords with their PPI chaff? Hope so as if not innocent consumers will still be non-advised into buying second rate cover, without ever knowing of the real deal.
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AIFA recently asked LifeSearch to help the ABI develop a guideline script for advisers selling Critical Illness Cover. The FSA’s ICOB sourcebook published in June noted that the product was not properly explained during 82% of cases of mystery shop calls (in a survey that did not include LifeSearch). The ABI and AIFA took action to sort out the problem before the FSA did things their way.
The points that need to be covered are those any good adviser would cover anyway and, importantly, non-advisers would be subject to the same duty of care. The scripts are only a guide to those advisers who feel they need it, particularly those who are not experienced in selling protection.
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Posted by @
07:05 PM, July 23
CI and IP are complex plans where the unwary can be caught out.
Advisers who are not competent in their full understanding of these plans should not be advising on them.
A script? No. An aide memoire, maybe.
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Indexed policies are a good idea for consumers to consider. LifeSearch has increased the level of sales of indexed policies from 33% to 45% in the past year, which shows how consumers are benefiting from our advice. These are sales where there is no premium increase to the client in year one.
Indexation mean the value of an insurance policy increases over the years so that any payout is not reduced by the effects of inflation. Not every customer will take up the option as it costs a little bit more, but it should at least be considered.
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A lunch with senior IFAs combined with the Swiss Re Protection report, of which they had not heard, exposed the root of the problem facing the protection market in reaching consumers through IFAs. As one senior IFA noted, “There is no way we can know all the features of each product, but when we get a client who needs cover, we look on the Exchange and ask around the office and get them a good deal.” Imagine if he took the same view of his investment fund selections!
Of course there are many protection expert IFAs, but it is inevitable that as IFAs are driven out of business or on to the richer and older clients by the RDR and the FSA’s already rather dated definition of what’s good for consumers; so protection’s traditional distribution base fades. And while IFAs who cannot keep themselves up to date in protection, will no doubt start to refer protection on to specialists so as to maintain quality of recommendation, that does not help the main consumer market.
This supply side gap has been growing for years and has driven providers to several different strategies in order to market their products. The first, selling online through price comparison sites, was adopted with relish by all the biggest players, despite this column’s efforts at pointing out the consumer detriment so caused. But though their niche is established, price comparison sites can’t penetrate a consumer market, they live by undercutting the better quality routes to it, so now that that route has proved a dead end for most, the focus has shifted to the ex-mortgage broker tele-sales market, which has taken advantage of an FSA blind-spot to apply non regulated hard selling skills to improve conversion rates by giving advice while claiming not to. But with lapse rates and complaints at levels the providers never imagined in their worst nightmares, this scam sales approach looks set to fade fast.
But this sensible market correction does not solve the key problem, ignored as ever by the Swiss Re report, that ever fewer people are buying protection with advice, which decline means a decline in average monthly premium secured and an increase in lapses. For that to be solved a new approach to distribution needs to emerge. The ABI seems to be coming around to the suggestion first mooted in this space many years ago that marketing to consumers is sorely needed, but I fear that any such marketing effort will find itself almost unable to be properly fulfilled, because of the lack of quality distributors that actually know much about protection. There really is little provider profit in a business case that gets consumers buying protection if their buying route is honest non-advice.
With the provider market currently undergoing rapid contraction, we seem set for a very few large businesses vying for market share through distribution channels ever less able to actually get consumers to do things properly. I can’t think of a set of circumstances more likely to drive the growth of tied agencies or even, goodness me, the return of direct sales forces. I wonder which provider will show the resolution needed to lead?
Tom Baigrie
LifeSearch MD
(this article was published in the July edition of Money Marketing)
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Why do some providers make it difficult for us to keep our customers on the books? It’s a question we’ve been asking ourselves more and more. We’ve invested much time, money and effort into improving our already good retention rates even further, but some providers makes things pretty hard to get clients back on risk.
The situation is even worse when a competitor is involved, and who is pushing the client to replace our cover with them. A new policy can often be set up in the blink of an eye without any paperwork, yet if we can win the client around, re-instating their original cover can lead to paperwork galore! Cheques for back premiums, a paper Direct Debit Mandate and a Declaration of Health (DOH) are all common requests. It’s not easy convincing a customer to do all this when they can take out a brand new plan without this hassle, AND without having to pay any missed premiums. So often we don’t. We set up a new plan ourselves; sometimes with the same provider, but sometimes not.
Some providers have supported intermediaries; back premiums can be paid over the phone, direct debits can be re-instated or altered by phone too, and one provider has already agreed to teleunderwrite DOHs. I’m speaking to the rest asking them to follow suit. It’s logical for DOHs to be done this way given that most providers have teleunderwriting capabilities.
But some providers are very slow to make changes. This hinders our efforts to retain customers and also means their own retention rates suffer. If a provider makes it difficult to re-instate cover, then it’s reasonable for the broker to set up a new plan to ensure the customer gets cover back in place quickly.
Good communication is vital. If a premium is missed or a customer cancels the cover, it’s only right that the broker is informed immediately. Same-day, electronic communication should be offered as standard to give the adviser the best chance of saving the business. Legal & General led the way with this, others have followed, but some are lagging behind.
A key need is for providers to inform intermediaries when customers change address. Again, some do this but others are reluctant to, or simply do not have the capability. All providers would expect this courtesy from an intermediary, so why not the other way around? We keep the providers informed. It’s hard for brokers to save business when the provider has not told them the contact details have changed.
Customers are facing tough choices with their finances and protection plans are often cancelled without proper consideration. Some are often lured into replacing cover with cheaper but less comprehensive cover, sometimes without being made fully aware of what they are sacrificing. Swift cancellation notifications have helped us prevent many customers from making this mistake.
Providers must make retention a priority and ensure their processes are efficient. If they don’t, lapses, re-broking and churning will increase.
Emma Prescott
Life Office Relationship Director
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Taking out a financial protection product is important to protect an income against death, illness or disability, but there can be much more to a policy than the payout. For example, LifeSearch give all their customers free access to the counselling service Red Arc when they claim.
Some car insurance policies include Breakdown Cover and some home insurance policies provide Accidental Damage cover. Protection is no different and some policies include much more than consumers first realise. Here, in no particular order, is a selection of the top unsung protection benefits:
Free Life Insurance (Aviva) gives £10,000 worth of free life cover to each new parent who contacts Aviva before their baby is six months old, and runs until their first birthday. It is a limited amount of cover, but is an excellent introduction to Life Insurance for families that have no financial protection.
Carers Benefit on Income Protection (Royal Liver) pays a lump sum of four times the gross monthly Income Protection (IP) benefit up to a maximum of £25,000 to parents who want to take time out from work to care for their seriously ill child.
Vitality (PruProtect) is an incentive programme that helps policyholders to live a healthier life, and then rewards them when you do. By doing certain healthy everyday activities like walking, going to the gym, eating healthily or not smoking, they can build up Vitality points and reap rewards including discounts on protection premiums.
Lifeline (Scottish Provident) is a specialist helpline that puts customers in touch with a team of fully trained experts who can give free practical and confidential information on a wide range of issues including tax, law, health and employment, as well as counselling.
Helping Hand service (Bright Grey) comes with every Bright Grey menu plan at no extra cost and offers a broad range of help and support throughout the term of the plan to clients and their families. It includes access to a specialist nurse, therapist and counsellor and a range of helplines.
Return to work (Pioneer). As part of their Income Protection policy, Pioneer will fund appointments and investigations privately, where appropriate, when there are long NHS waiting lists. Also, if a claimant is unable to resume their own occupation Pioneer will consider funding college courses, vocational training etc.
Best Doctors (Bupa Individual Protection and Fortis). Policyholders who make claims under their Critical Illness Cover or Income Protection policy have 24-hour access to this independent service that can locate and contact specialists worldwide who are qualified to treat the condition for which the claim has been made. There is also a 24-hour healthline.
Extra Care (LV=) is aimed at improving the living situation for critical illness customers and relevant income protection claims. After their claim is complete, customers have the option of receiving oncology, cardiology or neurology care, therapy, physio and counselling. Extra Care also provides customers with the option of a follow-up from a personal nurse, with ongoing help available.
It's important for customers to seek independent advice, as a good financial adviser will be able to identify the most suitable policy for a client that many direct sellers just don’t have the expertise to do.
There are many excellent and unique benefits available to customers that deserve to be more widely known. It's important that price is not the only consideration when buying protection. These ancillary benefits could really make a difference to people's lives and hopefully more customers will take advantage of them in the future.
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