Defaqto’s Matrix database contains details of as many as 250 long term protection products – life assurance, critical illness cover and income protection insurance – from 65 different providers.
Looking at distribution channel, 42 per cent are direct-only products sold to the end customer by the product providers themselves, 41 per cent are adviser-only products distributed through advisers, and 17 per cent are available through both channels.
Purely in terms of the number of products available, then, the distribution looks pretty balanced between direct and intermediated business.
However, the latest industry statistics tell a different story.
SwissRe reports that in 2018, over 70 per cent of life and critical illness sales and over 90 per cent of income protection insurance sales were attributed to financial advisers (tied and directly-authorised).
So non-intermediated business is an important but, as yet, still small proportion of the protection effort.
Ultimately, it is going to be necessary to distribute more protection direct to customers, because those with straight-forward needs and little disposable income are unlikely to have access to financial advice; and financial advisers are unlikely to see such clients as viable prospects.
But, for the time being at least, the key to improving sales and increasing penetration rates of long term protection products lies within the financial advice sector.
Research by Defaqto in 2019 among 275 advisers, 70 per cent of whom were either general practitioners or protection specialists, has provided some fascinating insight to the state of protection advice.
In our research, we highlighted some of the protection strategies that might be utilised by financial advisers with their clients but would not typically be available to a customer self-serving or purchasing direct.
These include the use of whole of life assurance for IHT mitigation, personal protection and wealth creation, the use of menu plans to cover more risks, the use of relevant life plans to provide life assurance benefits to particular employees and the opportunities afforded by considering clients’ business protection needs.
The extent to which advisers have engaged with these strategies is perhaps a measure of the commitment of the practitioner to protection advice specifically. And I am pleased to report that advisers are getting involved.
The most popular of these strategies was the use of menu plans with 67 per cent of advisers favouring this as a way to write life, critical illness and income protection benefits within one plan thereby covering more of the client’s needs using a single application and underwriting process.
In recent years the quotation portals have embraced the concept of multi-benefit cover thus encouraging advisers to adopt the menu approach.
The response from advisers has been good, as evidenced by the increase in multi-benefit business.
Earlier this year, Iress reported a 15 per cent increase in multi-benefit cover in the first quarter of 2019 and iPipeline reported that the volume of multi-benefit new business year-on-year sales increased by 77 per cent.
Relevant life and business protection