Necessity, so we are told, is the mother of innovation. And in recent years the financial services industry has made a good fist of ‘inventing’ in the ‘necessary’ interests of empowering consumers.
We have seen it with the development of fund platforms that now give consumers control over their investments – and in the case of financial advisers, a watching eye on their clients’ investments.
Despite the thorny issue of best-buy lists and Woodford promotions, and lingering concerns over what constitutes fair charges (ongoing as well as exit), fund platforms have been an overwhelming force for good.
Nowhere has the mother of innovation been more relevant in recent years than in financial protection insuranceWe have also witnessed it with comparison websites that now enable people to buy a whole array of insurance products with a minimum of fuss – and with internet/mobile banking.
Goodbye high-street banking, hello FirstDirect, Monzo and Starling – and in the caseof comparison websites, hello Meerkats (I stillfind them amusing).
But nowhere has the mother of innovation been more relevant in recent years than in financial protection insurance – a part of the financial services market still tainted a little by the scars of payment protection insurance, medical non-disclosure issues and a poor press.
Slowly, but surely, we are seeing a financial protection industry develop that is fit for purpose - moving forwards rather than backwards and putting consumers first (front of house).
While I am still surprised when buyers of financial protection insurance have claims turned down for what seems like ‘serious’ illnesses – for example, cardiac arrest – the industry is in better shape than it has ever been.
Consumers are being better served while financial advisers now have tools available that enable them to make considered product choices; a far cry from yesteryear.
One example of necessary innovation is that pioneered by new kid on the block Guardian.
Last May I used this column to talk about its decision to introduce a new form of critical illness cover, one that would move with the times.
Rather than selling a critical illness policy with conditions set in stone, Guardian said that when it upgraded its policy the upgrades would be available not just to new policyholders but to existing ones.
Some enhancements, it said, might involve an additional cost if existing policy holders wanted them.
I applauded the move, stating: ‘It is called treating customers fairly and it should be part of an insurer’s DNA.”
These were words written at the time with much passion, given a case I had reported on in The Mail on Sunday where a motor accident victim had not had his claim met because his two ‘protection’ policies only paid out if the accident had resulted in the loss of both legs, not just the one he had lost.
It was a case that angered me greatly.
Well, Guardian has been true to its word. It has just announced its first set of upgrades (available to existing policyholders) – as well as some downgrades (which are not retrospective and only apply to new customers).
On a personal level, I was intrigued to see the change on the definition relating to low-grade prostate cancer (which I have).
Guardian has now removed the exclusion for those whose prostate cancer is ‘just’ under active surveillance. It means my cancer, excluded last year, would be now covered and I would be able to make a claim – if I had one of its policies.
Sadly, Guardian’s innovative lead is not being followed. Indeed, according to Alan Lakey, director of critical illness policy scrutineer CIExpert, many protection insurance rivals believe Guardian’s innovation is ‘unsustainable’.
“Some of the downgrades support this view,” he adds. “However, it is still an extremely good plan”.
I hope it is sustainable because it represents progress. It should be the norm, not the exception.
Carrying on the theme of necessities, mothers and innovation, the analytical tools now available to advisers in the protection insurance world are better than ever.
A few days ago, Mr Lakey gave me a guided online tour of CIExpert.
It is an astonishing database, one that allows advisers to identify the most effective critical illness policy according to a client’s particular circumstances (date of birth, smoker or non-smoker, amount of cover required, term and type, and children – even children planned).
A tool that provides claims data on nearly all insurers apart from a couple of renegades such as Phoenix and ReAssure. A database that allows advisers to drill down to the nitty gritty of individual policies, thereby enabling them (for example) to compare one insurer’s definition of accidental hospitalisation against another and discover one is 10 times better than the other.
A database that acknowledges the different critical illness needs of males and females – that more females in percentage terms claim for cancer illnesses while men are more likely to claim for heart attacks than women.
If only such forensic analysis was available in the investment funds industry then maybe tens of thousands of investors could have averted the Woodford debacle.
Jeff Prestridge is personal finance editor of The Mail on Sunday
