There have also been calls for more industry initiatives in order to help address the ‘protection gap’ particularly in light of the Seven Families campaign, which has apparently helped to see a slight pick-up in policy numbers.
But despite providers spending a lot of time conducting research studies into the gap and the stagnation in the market, the core of the research seems to suggest that the problem lies with consumers - who are just not motivated enough to buy protection.
I want to offer an alternative suggestion, that it is the industry which is at fault for being too focused on product and commission, instead of focusing on the changing needs and behaviour of consumers.
It is inevitable that protection business will transfer from a face-to-face sale to a face-to-screen or face-to-phone sale. And that is because that is where consumers will look for it and that is therefore where innovation will expand the market.
And yes I can hear the cries of ‘protection is sold not bought’ but are we that naïve to think that without talking consumers into buying protection, none of them would ever consider it?
Let us look at a few of the possible reasons why the industry is failing consumers.
• Taking a look at any provider’s application form will quickly make you realise it is a pretty daunting form to complete often needing the help of a broker to get through. Perhaps we should make it easier for consumers to buy the product by making the application process easier and faster?
• Many brokers are moving away from protection as RDR takes them towards investment and pensions. Of course there are many dedicated mortgage and protection brokers but the mainstream IFA is certainly no longer going out of his way to write protection business. I do not hear IFAs talk about building a risk management plan for their clients. It is always wealth management.
• Many mortgage brokers who have the perfect opportunity to sell protection are totally focused in securing their proc fees and let the protection opportunity pass them by. Of course, they could try to balance the value of offering a comprehensive service to consumers at the expense of losing mortgage-related income, or they could train a separate protection sales team but this costs money and increases regulatory pressures. Or they could outsource protection leads to a third party but many will not do this for fear of losing their customer to a competitor.
• Commission structures attached to protection are outdated as are most providers’ commission systems. It is indemnity or nothing in the main. Non-indemnity models exist but they are for the few with very deep pockets. This inflexibility hardly helps new entrants who genuinely want to innovate and build a stable and valuable business. Yet there is never any talk about providers changing their commission structures to accommodate new entrants or to help indemnity brokers move across to a non-indemnity model over time.
In simple terms access to product should be getting quicker, easier and more open to consumers, but in reality it is becoming more restricted and it is the industry’s fault.
The big providers dig their heels in on some story about losing their competitive underwriting edge, that is at best difficult to quantify, but most likely to actually mean they are just unwilling to or cannot change.
What they need to accept is that when consumers cannot find what they are looking for easily and quickly, they go online and they search.
In short, innovate and give consumers what they want because they will win out in the end anyway and the industry will benefit in return.
Martin Chapman is group corporate development director of Quintessential Finance Group
