At the Association of British Insurers’ annual conference in February, the trade body’s chairwoman, Amanda Blanc, said a lack of trust in the insurance industry remained one of its highest priorities.
She said: “Clearly we are concerned about the lack of trust. The financial crisis had quite an impact on financial services, but insurance companies didn’t actually fall during the crisis, they did quite well. Yet we are still perceived as being less trustful than the banks. So we clearly have a lot of work to do in terms of trust.”
But it would seem the tide is finally beginning to turn and the so-called ‘protection gap’ is slowly but surely closing, with policy sales on the up. In the first nine months of 2018, fintech company Iress reported the number of protection applications submitted via its transaction portal had grown by 22 per cent, reaching more than 500,000 in the period.
Income protection performed particularly well, with sales for the nine months increasing by 36 per cent compared with the previous year’s figures. But term life and multi-benefit products also saw sizeable boosts of 33.6 per cent and 29.9 per cent respectively, as Chart 1 shows.
Iress suggests sale volumes in the second and third quarters of a year are typically lower than the first, but the trend was bucked last year with August proving a particularly strong month for new protection business.
Cultural shift
It is widely agreed the growth of the protection market cannot be attributed to a single factor. The market is complex, both in terms of processes and the fundamentally emotional nature of the protection conversation.
Talk of serious illness and death can still be an intensely uncomfortable conversation for both consumers and advisers. So it has taken a team effort between providers, intermediaries and individuals to shape protection into something of a financial planning normality.
Jiten Varsani, mortgage and protection adviser at London Money, says education has played a major role, alongside technological advances, in helping increase protection sales in recent years.
He says: “Education is key to increasing engagement between advisers and clients. To date, no prospective client has ever contacted me for protection advice because they heard we have great systems in place to make the buying journey easier. They contact me because they have heard and understood the need for bespoke professional advice.”
Mr Varsani agrees the industry is again recognising the importance of protection advice, with firms reviewing their propositions and recruiting protection specialists.
“Selling a bit of life and critical illness to cover the mortgage is not protection planning – focusing on the wider collective needs of a client’s requirements is key to help bridge a protection gap that runs into the trillions of pounds,” he says.
In keeping with Iress’s sales figures, Mr Varsani points to income protection as the area he has seen the greatest growth. He says the product had previously been long forgotten and misunderstood.
“Once the versatility of income protection is understood, clients really do understand the role that it can play,” he says.
“I know some will find this controversial, but I’d prioritise income protection over critical illness where budget was a major issue. With the simplification we’ve seen in this area, income protection really is a key product that is needed but not known about.”
Technology
Protection may be a human product, but the role of technology in offering accessible and appropriate cover is evident. Iress’s own sourcing solution, Xplan Mortgage, allows for a protection quote to be returned at the same time as a mortgage quote – something Dave Miller, executive general manager of commercial at Iress, says is helping boost protection sales.
“Technology is making life easier by providing a mortgage and protection quote at the same time, and it’s helping put protection conversations to the forefront of an adviser’s contact with a client,” Mr Miller says.
“The easier a solutions provider can make it to access the right information, the easier it is for advisers to have those important conversations. By offering a pricing capability and cutting out the need to rekey data for different quotes, the solution is helping more mortgage brokers increase their protection sales.”
Last month the ABI soft-launched Percy The Protection Calculator, an online tool with the sole purpose of raising consumer awareness around the benefits of protection. The calculator estimates an individual’s likely income if they were unable to work as a result of illness or injury, combining government benefit data with information provided by the user. According to the ABI, the concept was designed to better inform consumers, shaping a positive story of preparedness rather one of “shock and terror”.
Alan Knowles, chairman of the Protection Distributors Group and managing director at Cura Financial Services, credits technology for breaking down the traditional barriers to advisers writing protection, such as time constraints and lack of product variety.
He says: “Improved technology is making it easier for people to write protection insurance. Technology advances have meant an increase in collaboration between firms, such as wealth advisers, working with protection specialists.”
Sharing is caring
Mr Knowles adds: “The biggest factor contributing to increasing protection sales has to be the development of strong communication networks. Protection firms are starting to work together for the greater good, and companies are signposting and referring to each other when they don’t have capacity to do something themselves.”
The PDG was founded in 2016 and consists of intermediary firms aiming to improve the protection market and push insurers for better consumer outcomes.
The group has led the successful Funeral Payment Pledge campaign in recent years, with the likes of AIG, Aegon, Aviva and Royal London committing to an early payment system for bereaved families to cover funeral costs in the event of a delayed claim.
Mr Knowles says: “I think if we continue to collaborate and work together for better customer outcomes, then trust of the protection industry will continue to grow.”
Tom Baigrie, chief executive of LifeSearch, says the market has entered a new phase following a period when protection advisers found themselves “paralysed” in coping with the regulatory changes demanded by the Retail Distribution Review and Mortgage Market Review. Mr Baigrie says during that time it was only the specialists that were able to continue as normal.
He says: “While the growth of the specialists was a key factor in arresting the long-term decline of the market and their growth continues apace, the overall growth in the market is now coming more from IFAs and mortgage advisers having the headspace to be able to develop the skills and systems needed to give protection advice safely and profitably.
“In addition, we expect signposting of harder-to-help clients to specialists, able to help those with disabilities better than any generalist can, to become the norm. It needs to stop the underlying limitations that the very big, and also growing, non-advised sector has on the overall consumer outcomes our market achieves.”
Mr Varsani admits there are still advisers who shy away from protection, perhaps due to a lack of confidence or simply a lack of time, but says the market is witnessing a willingness to share clients and prioritise consumers receiving the right advice from the right adviser.
He says: “Protection has become very technical and not something an adviser should just tickle with. I receive many referrals from other advisers who just want a good protection job doing for their client and I can see the market polarising further in this manner.
“Mortgage advisers refer clients to IFAs for pension and investment advice all the time. Protection referrals really are no different.”
Rachel Addison is a senior reporter at FTAdviser.com
