The Life Insurance Market
The theoretical perfection sought by the RDR might just start to become practical perfection in 2013. I hope so, for as much as I loathe the regulator’s scornful dismissal of sales-advisory businesses of sound repute and long standing, the end result will be a small and identifiable tribe of professionals that might well be able to grow dominant.
Alongside them we can expect a raft of tied and semi-tied sales forces and alongside that the online world of guidance and simple transactions. It might just end up being an orderly market after all.
There is one aspect of all this change that the protection market should be very wary of. It may well increase the already fast-growing number of poorly run telephone selling operations, both advised and non-advised, that have imported the tactics of the unsecured loan and claims management markets into ours. At first glance, they can look a bit like my business but they have a sell-at-all-costs philosophy we despise - protection is too important for that. If left unchallenged, this crowd will do the whole market great damage.
Rather than just sound warnings I would suggest a basic code of conduct aimed at promoting the uptake of protection by clearing up areas of known customer confusion and supply-side failing across all types of distribution.
Protection seller’s code of conduct
All those who arrange protection provide vital cover for consumers in crisis. This makes it imperative our overriding aim must be to serve well those who buy protection, no matter how they do it.
The following shortlist tackles the most obvious current failings found in protection intermediation and thus represents a minimum set of corrective behaviours if that is to be done.
Its provisions can easily be met on websites, face to face or in telephone conversations, whether they are deemed by the FSA to be advised or not.
- Those selling critical illness cover must explain its limitations in line with the FSA’s requirements.
- Those who choose to highlight terminal illness benefit as a product feature must explicitly state its limitations and ensure it is not confused with CI cover.
- Those choosing to discuss total and permanent disability cover and income protection must explain the definition of disability on which the policy will pay out, such as, own-occupation or activities of daily life.
- Those selling PPI/MMPI/ASU must make the standard exclusions clear to customers and must mention longer-term IP as a viable alternative at some point in the sales process whether they offer it or not.
- Sellers must clearly state at outset whether they provide regulated advice or not.
- All sellers must demonstrate they have properly provided for the repayment of indemnity commissions on lapsing policies.
I wonder what you think of it? I bet you will want to add many things but my aim is to cover non-advised and online sales too, and their duty of care is much simpler than advisers’. And so, if you go much further then you are making a rulebook for advisers only and we have enough of those.
I hope to get insurers to agree that it is sensible to set minimum standards and that they ask all their agents to sign up to and honour in practice a final version. As I see it, that is basic self-regulation and that is the very best way of avoiding the destruction the regulator has already inflicted elsewhere. Or to put it simply, so long as we stop dodgy distributors from jumping on it, protection has a great future.
Tom Baigrie is CEO of Lifesearch
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The UK’s annual no smoking event gives smokers the perfect chance to save cash on their finances.
No Smoking Day on 14 March gives smokers a great opportunity to kick the habit and save themselves thousands of pounds on their Life Insurance policies in the process.
Insurance companies consider ex-smokers to be ‘non-smokers’ a year after they have given up. Being classed as a non-smoker means that, for many types of policy such as Life Insurance and Critical Illness Cover, premiums can become around 50% less expensive, so many people could still save money even if their policy has been in force for years.
To be classified as a non-smoker by an insurance company you must have quit smoking for at least 12 months. At that point, you should speak to a financial adviser for free to see if they can rebroke a new policy for you at a cheaper premium. A cheaper premium is not certain, as it also depends on age and health, but there is a very good chance that the premium will fall.
Matt Morris, Senior Policy Adviser at LifeSearch, says: “It is important to make sure you have a new policy in place before cancelling the existing one, as a new policy could turn up some nasty surprises in underwriting and may even be declined if your health has changed.”
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Protection Seller’s Code of Conduct
All those who arrange protection provide vital cover for consumers in crisis. This makes it imperative that our overriding aim must be to serve well those who buy protection, no matter how they do it.
The following short list tackles the most obvious current failings found in Protection intermediation and thus represents a minimum set of corrective behaviours if that is to be done.
Its provisions can easily be met on websites or in telephone conversations, whether they are deemed by the FSA to be advised or not.
• Those selling Critical Illness Cover must explain its limitations in line with the FSA’s requirements.
• Those who choose to highlight Terminal Illness Benefit as a product feature must explicitly state its limitations and ensure that it is not confused with Critical Illness Cover.
• Those choosing to discuss Total and Permanent Disability Cover and Income Protection must clearly explain the definition of disability on which the policy will pay out. e.g. Own Occupation or Activities of Daily Living.
• Those selling PPI/MMPI/ASU must make the standard exclusions clear to customers and must mention longer term income protection as a viable alternative at some point in the sales process whether they offer it or not.
• Sellers must clearly state to customers at outset whether they provide regulated advice or not.
• All sellers must demonstrate that they have properly provided for the repayment of indemnity commissions on lapsing policies.
Tom Baigrie, LifeSearch CEO
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I was thinking of teasing you all about the new form of ‘churn’ afflicting our industry, that of Life Company MDs and CEOs, when David pointed out to me that we too had churned our top 2! He’s in charge now!
It has indeed been an amazing year of key player changes…..
At Aviva, Trevor “right place at the right time” Mathews is taking responsibility for Mark Hodge’s “How to succeed post RDR” planning, whereas at Friends, Steve Payne is taking over Trevor’s effort, just as Ian Clarke is getting settled in at LV and Helen McEwen has just kicked off at Aegon!
Nick Frankland and please God Peter Graham are beginning to change things up at L&G, and of course as of yesterday at Ageas, Darren Spriggs is now officially discovering the full genius of Martin’s mind,
One could of course, track reinsurers and big distributors and find something very similar!
I think this is what a market looks like when the businesses in it are very unsure of their best future direction and the individuals involved in strategy are unsure if their plans will work. Certainly there are relatively few who have led the planning for the post RDR world who are hanging around to take responsibility for their plan’s results!
Of course, all this uncertainty comes about for just one reason.
Those that regulate us continue to take a cavalier approach to achieving their goal of perfection in consumer outcomes. Just like charging cavalry, they have focused on decisive victory and worried not about the casualties incurred. They have remained unconcerned with the detriment their approach is causing to Britain’s levels of savings, investment, protection and availability of financial advice.
Of course, the theoretical perfection may well start to become practical perfection in 2013, and the great victory may prove worthwhile. I hope so, for as much as I loathe the regulator’s scornful dismissal of sales-advisory businesses of sound repute and long standing, the end result will be a small and identifiable tribe of professionals that might well be able to grow. And alongside them a raft of tied and semi-tied sales forces with a much more direct connection to manufacturing than has been allowed before, and alongside that the online world of guidance and simple transaction. It might be an orderly market after all!
But somewhat more certain is the likely effect of the other European regulation-inspired changes due at New Year. We all now expect price rises to result and we all hope of a sales rush this year; possibly followed by lower new business (and lower lapses) next year as the true scale of consumer led re-broking is revealed.
By the way, please note the date, 21 December 2012, the last working day before Christmas, and please ensure that any short term costs of making happy those customers caught in your underwriting pipe on that day are borne by you, not consumers or distributors.
The varying provider strategic responses to these many regulatory conundrums are educational. Here are a few:
Standard Life deserted the protection price war battlefield nice and early. Now on a nice little earner back on Civvy Street, wearing sharp suits and smoking roll ups and flogging a bit of Wrap.
Aegon toyed with the same plan, but cautious Dutch heads decided to hedge their bets and they are gaining back long conceded protection ground in carefully selected areas.
Scottish Widows focused entirely on serving its bancassurer distribution to great effect, so much so, that rumour has it that we can expect it back in the open Protection market before too long.
And the terrible twins of Royal London are at last a key focus of their Royal parent and seem to all to be a motor insurance style multibrand strategy waiting to happen.
Friends Life? Well they crashed ‘em all together and wisely decided to fly the flag for quality ahead of price while, as a clever plan B, unleashing the Cracknell to sign up anything that stops moving.
L&G retain an iron grip on big tied agents, and little ones too, with a growing taste for pioneering service initiatives.
Aviva have gone for simplified, D2C and mega brand marketing as well as lately a push back into the face to face adviser market, perhaps in anticipation of the expected army of RDR refugee advisers.
LV= The same really, but smaller and perhaps nippier.
Pru Protect. A product for every occasion and a battalion of reps for that refugee army; and now a tied face to face force perhaps staffed from same! In short, the retro model. Never bet against a South African in UK financial Services folks.
And Ageas, well, although we often failed to click, the business Martin and Lynda and Shanti and Satish built is a real asset to the market place and we hope Darren succeeds in taking it forward, perhaps using more conventional management theory.
And a mention for two smaller players getting plenty of our business, the friendlies at Exeter Family and British have seized the IP gap by dropping ADLs, which we hope will show all of you how to make IP the simpler, mass market product it should be.
I’ll leave the list there, and hope none feel too wounded or misrepresented or left out, for my aim is not to pretend to analytical accuracy, but only to amuse you a little, while making the point that it would be very odd if ALL these strategies worked.
At LifeSearch we fear only one aspect of all this change. It’s not the big networks and their new super high premium approach. We look at that model with great interest and no desire to take part.
No, what we fear is that with RDR approaching and premiums set to rise, our market may well attract many new start ups, some of low quality, and that provider eagerness for market share will accelerate the already endemic granting of agencies to dodgy distributors, who are thus allowed to flog great brands and good products awfully. A client ripped off by one of these will hate our industry forever, and so you must stop the laissez faire approach to the quality of your distribution.
Let me be clear, online non-advice is not my beef, indeed it’s our client.
When done right, it’s clear and fair, though of course it can be improved by advice and that’s where LifeSearch now comes in. We help make great businesses able to help their customers a bit better!
No, my beef is focussed on the many poorly run telephone selling operations, both advised and non- that have imported the tactics of the unsecured loan and claims management markets into ours.
It’s a sell at all costs philosophy that we despise, because Protection is too important for that, and because these are just foul versions of LifeSearch, that will, if left unchallenged, do us, and more importantly the whole market, great damage.
Providers and reinsurers should not rely on a FSA or network tick-in-a-box to absolve you of your duty to those who see that your super-brand is involved and think it makes everything alright.
But rather than just be critical we want to make sensible proposals to improve the consumer outcomes that Protection distribution in all forms achieves.
So we have talked to others influential and have drafted a short and basic code of conduct for protection distributors so as to promote the uptake of Protection by clearing up areas of known customer confusion and supply-side failing.
My first Draft will be handed out here, later today. I wonder what you’ll think of it. It aims to give consumers the best chance of getting a fair deal, no matter how or from whom they buy their protection.
It’s very short, for it seeks only to tackle the worst current practice, not provide a rule book, or a set of lofty principles. You may think there is work to do on it yet, but I hope you will agree that it’s sensible to set minimum standards and that you will ask your agents all to sign up to and honour in practice a final version of it.
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Posted by @
04:39 PM, April 18
Just read this whilst waiting for a call back with a quote, it'll be 12 months tomorrow since I've been a non-smoker!
Well said Tom. You and I both sing from the same song-sheet, some of the players may be different since I was involved in the market, but you're fighting the same battle and issues on behalf of the consumer - will it ever change and won't providers ever learn that fairness and 'the right thing' for the punter is best in the long term for the market and ultimately profitability?
Don't give up Tom, keep at it and all power to your elbow. As I say to my clients in my new career of dog training - consistancy, persistance and patience are the key to changing behaviour - this is no different!