The Life Insurance Market
Protection is good for those it gives peace of mind that their family and themselves are cared for financially no matter the catastrophe.
It’s VERY good for those that need to claim
That makes it good for society and VERY good for the economy.
So , Provided it is properly arranged, and that is not always the case of course, the more we arrange the better.
If that is an acceptable premise then I’m talking to you because mostly we arrange less….
Read Tom's presentation on the PowerPoint you can find here (read with the notes field to see Tom's presented words)
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My columns have long had two separate areas of focus, protection (which I would love to make a proper noun, as we really do deserve a name) and regulation, which I would love to see in as small a font as possible.
The two used seldom to clash but, since the Insurance Conduct of Business Source-book and now payment protection insurance, they are set to meet headlong again on January 1, 2013. That date sees conditions right for what New-foundlanders call a perfect storm. You saw the movie.
From Europe will come two totally separate barometer dropping cold fronts. The first is called Solvency II. Its freak wave is known as ’I minus E’ and it will make every provider increase their rates to varying degrees and leave all of them in uncharted seas.
The second depression is the ’Test Achats’. It removes gender from insurance pricing. And no matter what the actuaries tell their skippers, they can have no certainty about what that will mean in the repriced market of 2013, other than premiums must rise overall to cope with their uncertainty.
So that is two waves driving prices up on the same day. If you remember your science lectures, that will double the pricing amplitude, which will make for an interesting market that morning.
But it is the last storm that blows in that morning from the Thames Estuary that will sink a few ships, I reckon. The retail distribution review will leave many small IFA boats in equally uncharted waters, but without the capital floats providers and reinsurers enjoy.
And just like the weather-gods, the regulators in Europe and London do not care how high the waves rise. They have long acted as if the best way to ensure safe sea-passage is to ensure that there are no ships.
The bit of it I do not think providers have yet got to grips with is the effect of all RDR-avoiding advisers heading out into the protection waters. Many will consider themselves pretty expert as they have done a bit over the years, though they fish for it but rarely, and few take guidance easily from those who seek to tell them how to do things.
But the RDR may drive many thousands of them to reinvent themselves as protection specialists. And if the pro-viders do not seek to train and quality control their sales processes but merely accept whatever they haul in, chaos is certain on the quayside when the underwriting and new business teams try to land this catch. Multi-proposing and loading surprises on an epic scale can be expected and the consumer will have a miserable time flapping around waiting to be properly chilled.
Memo to self: do not risk service chaos by dealing then with any provider who has not demonstrated proper planning for a flood of new business from inexperienced advisers at a time when their rates are just a best guess. Memo to the portals: prepare for serious bandwidth issues of all sorts.
Memo to providers: train all you want to get business from really well and if you plan on being competitive that morning, get everything right or hire a crack trade press PR.
And memo to advisers: among older, richer clients looking for comprehensive cover, 30 per cent will be loaded, many will not be taken up and once that is all done, 30 per cent lapse rates will follow unless you add serious value. It is not as easy as everyone says it is folks and on January 1, 2013, it is going to be much harder. Prepare properly and you will be cool. You read it here first.
Tom Baigrie, managing director at Lifesearch
(This article was published in a recent edition of Money Marketing)
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