Quality is a word I don’t often associate with the financial services industry. Indeed, in these financially challenging times quality is something rarely offered – and not often sought. Price is the order of the day. The lower the better.
For the past six months, I’ve been looking at how the insurance industry has been adapting to the new rules from the Financial Conduct Authority on price walking – the practice whereby insurers subsidise new home and car cover business by charging loyal customers a loyalty premium. In other words, the loyal subsidise newcomers.
The new rules, effective from the start of this year, are meant to eliminate price walking. I’m not convinced they’re biting as hard as they should be (regular readers of The Mail on Sunday will have seen my reports on the issue).
But what is obvious is that the home and car insurance markets have become heavily commoditised. Price is the overwhelming driver of business, be it new or renewal business. And in order to compete on price, insurers are increasingly hollowing out products.
Cheaper cover, but less effective for consumers. And often cover that can only be bought online, and where any claims or queries must be made online – no cheery person on the end of a phone to help you.
All rather depressing. Yet there are segments of the insurance industry that seem to be resisting this temptation to compete on price and price alone. Protection insurance is a case in point.
Last week, I made a rare outing from my newspaper’s office in west London to acknowledge the 10th anniversary of CIExpert, a business that compares the cover of hundreds of critical illness policies, old and new.
The event, held in a rather trendy member’s club within spitting distance of Shoreditch, was well attended and it seemed everyone was having a marvellous time as the champagne flowed – I arrived late, one of my annoying traits – and corks popped with abundance.
I stood by the door as various people from the insurance industry said their bit about the value of CI cover. Not just at the point of claim but in terms of the related services that often come with such cover, for example, second medical opinions. And of course, cover for children.
But it was Alan Lakey’s speech that really caught my ear. Lakey, the co-driver behind CIExpert’s success along with Clive Mayne, eats and sleeps CI cover. What he doesn’t know about these policies can be put on the back of a postage stamp.
What Lakey and CIExpert have done is help revolutionise the way cover is recommended by financial advisers, and slowly but surely how companies construct their policies.
He has helped build an amazing computer system that is able to assess the quality of CI policies. It has been a labour of love and a wonderful addition to the protection insurance industry. It explains why the turnout at the Eight Club Moorgate was so splendid.