Simplicity is complexity resolved

It is nearly 20 years since I launched the first ‘menu of benefits’ protection product. This model has since become the norm and has enjoyed much success, but was it the start of the road to complexity that is now stifling growth?

Having recently spent three months on gardening leave from my role as managing director of Bright Grey and Scottish Provident, I have had plenty of time to reflect on the complexity conundrum.

I remember the London launch ‘menu’ event very clearly. In the audience was John Joseph, one of the most respected protection advisers in the industry. His opinion of your products in the media could genuinely mean the difference between success and failure. After I had finished delivering my presentation, Mr Joseph stood up and slow clapped.

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“Congratulations. You have just launched the most complicated product I have ever seen,” he said. A wave of disappointment hit me until he added: “But I love it.” He loved it because it fitted the advice process perfectly. Advisers could recommend any combination of life cover, critical illness or income protection, with varying terms and combinations of lump-sum and income payments.

Compared to where we are now of course, that first menu product was not complicated at all. It had an eight-page application form, covered 16 illnesses and offered a small choice of insurance options. Now providers offer products covering up to 50 illnesses, with partial payments on less severe conditions, ‘ABI-plus’ definitions and a myriad of ‘best doctors’ and ‘helping hand’ add-on benefits. Application forms contain up to 32 pages with a vast array of medical questions.

Many advisers still love the complexity and echo Mr Joseph’s comments of two decades ago. Duncan Deaves of Chase Templeton said: “Again for ‘proper’ advisers, the more complicated the better as then clients value your advice not your price.”

Despite the almost weekly additions of extra features to propositions, the adviser protection market is not growing. Granted when the 2008 financial crisis decimated mortgages, advisers compensated for the loss of associated protection by recommending more family and business cover. Now that mortgages are finally starting to move again we are not seeing a pick-up in mortgage protection business.

Is complexity the cause of this? After going through the mortgage advice process do clients want to spend more time talking about protection and then filling in a 32-page application form for a £20-a-month term assurance? As always time is precious and, with a steady stream of mortgage clients now wanting their help again, a complicated protection product might get in the way.

Complex products also generate the need for more research to satisfy compliance. Adviser Darren Scott-Guinness said: “Compliance, research, a myriad of products and, of course, vast amounts of paperwork could be construed as a reason for not recommending protection cover.”

If the contention is that we have made protection too complicated to expect market growth, then does that imply that simpler products would give us salvation? Some advisers agree that due to their low-cost and time-efficient application processes, simplified products could be the solution where life cover is the only protection need identified. But what about a simpler CI offering?