In Depth: Should influx of IFAs to protection be welcomed?
There is almost unanimous acceptance that the parsimony of much of the UK populace with regard to protection is an issue that needs to be addressed - something that has driven many to call for an increase in adviser activity in the sector.
It is perhaps serendipitous, then, that many advisers are already looking to move into protection advice in the lead up to the Retail Distribution Review, in part because commission will remain payable on protection products.
But despite the seeming simplicity of recommending protection products, advising on these products can be a minefield.
In particular, insurance providers have come under criticism of late for not paying out on insurance claims, with two high profile cases recently bringing this issue into sharp focus.
In one case, chauffeur Chris Hargreaves won a long battle against Scottish Provident after it refused to pay out on an activities of daily life income protection policy, with the Financial Ombudsman Scheme ordering the provider to pay out £4,800, including compensation of £100.
In another case, reported by FTAdviser’s sister paper Financial Adviser, Canada Life refused to pay out a group income protection policy to a brain tumour patient claiming that the generic occupation definitions listed on the policy would make it possible for him to return to work.
While the focus has inevitably been on the insurers issuing the policies, questions have to be asked whether IFAs should ensure that the product for their client is the right one and will pay out should the unthinkable happen.
With the complexity of protection advice coming more to the fore, the expected movement of advisers into the protection arena is an issue that is increasing in importance. But will there really be a major influx of IFAs into the sector?
Peter Chadborn, director of Plan Money, believes that there will, pointing out that advisers who move into the insurance space have two choices: to be a broker “who finds a cheap quote for their client”; or to be a genuine adviser “who wants to add value to the client”.
“My concern is that, yes, there may be IFAs moving into this area that want to operate like a broker. Perhaps wittingly, perhaps unwittingly... maybe a way to write business but I think it will happen, although it won’t be widespread.
“Life offices should be offering education in this area. Protection Review does excellent training and it has been very well received.”
Kevin Carr, chief executive of Protection Review and managing director of Kevin Carr Consulting, also agrees that more advisers will advise on insurance post-RDR, stating that “it is already happening”.
“I think a proportion of advisers will stick to mortgages and protection, which is no bad thing, while some others will migrate towards protection as well as being RDR qualified, perhaps partly due to commission staying.”