Winston Churchill once said, “If I had my way I would write the word ‘insure’ upon every door of every cottage and upon the blotting book of every public man, because I am convinced that, with sacrifices which are inconceivably small, families and estates can be protected against catastrophes which would otherwise smash them up for ever.”
You probably don’t need to know the identity of the speaker to be able to date that quote at several decades ago. In the eyes of the public the insurance industry today seems far removed from that model of providing honest protection, supporting the afflicted against a sea of troubles and no leading politician is so willing to align themselves with the industry.
There is a widespread perception that insurers are there to support shareholders rather than policyholders. And, sadly, the insurance industry has more often than not been its own worst enemy in creating this impression.
Admittedly this is largely the result of a significant part of the – mostly general insurance – market that seems more preoccupied with avoiding payouts to keep premiums low. And a significant chunk of punters who are delighted to have got the “best deal” until they reach the crucial part of the process where they need to claim, when they discover they have anything but.
Within protection rather than general insurance (a distinction the man in the street is unlikely to make incidentally) several providers have also done their bit to tarnish the perception of the sector. There have been numerous well publicised instances of failure to pay out, newspaper reports tugging at the heartstrings of their readers, appealing to a gross sense of injustice that an ordinary person has been done wrong by some faceless conglomerate.
Of course there are millions more policyholders who have received payouts and are more than happy with their insurance, but nobody wants to read about those. I know that the majority of these cases are the individual’s fault, but each is a PR disaster for the company involved and the stories are consistently presented as another butterfly broken on the wheel of a heartless industry. Without exception, the lumbering inflexible way firms deal with the complaint makes it worse.
The same can be said of the speed at which so many major firms came round to disclosure of claims data. Again there is a strong argument that the value of these statistics, presented without any underlying details, is limited, but that didn’t come across. Instead insurers were presented as stuffy, stuck in their ways and out of date, not only keeping money that was rightfully yours, but also refusing to admit when they were doing it.
The clumsiness in tackling public misconceptions of the industry should not validate the overarching view of the industry, but even within financial services there has been a sense that, because it ducked the commission ban, somehow the RDR and all its associated raised standards has not applied to protection. (continued on next page)
There is obviously a case for commission to remain available on protection products. I would love to live in a world where all consumers rush to a financial planner to receive a tailored, holistic financial plan that they pay for with a fee. That might happen for a minority of sophisticated individuals, those for whom the protection element is merely the nuts and bolts underpinning their sexier investment holdings. But insurance doesn’t have the instant pizazz of investment. You can’t see the benefit immediately – and if you are lucky you never will – so most people need to be convinced of the value and sold a policy. They are less likely to buy into this if it is made to feel more costly and an upfront fee will undoubtedly deter many.
But insurance doesn’t have the instant pizazz of investmentWith all this in mind, it is reassuring to see a raft of product upgrades and launches in the protection space that all seem to put customers first.
The Royal London-owned duo, Bright Grey and Scottish Provident have announced improvements to their critical illness policies, Bright Grey extended its terms to cover more types of cancer. PruProtect has enhanced its innovative Vitality range to cover more conditions.
Perhaps most significantly, Friends Life, the company most synonymous with the resistance to publish claims data, has announced its most comprehensive cover to date, paying out on all forms of stroke without resorting to partial payments and making the revolutionary step of introducing children’s cover from birth.
Friends is not trying to be the cheapest provider, but the best. Being better rather than cheaper should be the model for insurers to follow.
The commission ban may not have been applied to the sector, but other central tenets of the RDR like transparency and TCF are clearly informing developments in protection right now. If it keeps this up, it might make it onto every cottage door yet.
