Consolidation has been happening at pace in the insurance industry but regardless of merger and acquisition activity, companies are still failing to provide top-class service and to promote the value of having cover.
This was the view of three speakers and a panel session at the Protection Review conference today (December 6) in London.
In a session titled 'How many insurers is enough', chaired by Jo Miller, director of operations at Protection Review, delegates heard just how many life and protection providers have come and gone over the past 20 to 30 years.
While consolidation in itself is not a bad thing, speakers such as Catherine Thirlaway, associate director at consultancy Alpha FMC, said there were glaring issues that needed to be addressed.
These included a need for better service, and meeting obligations under consumer duty.
Thirlaway said: "Consumer duty has shifted the dynamic in terms of regulation.
"Protection products are still predominantly sold rather than bought, and advisers do have a duty with their clients to explain the value of these products to their clients.
Perhaps the market is competitive or maybe even more competitive.Paul Yates, iPipeline"But the industry still has a significant job to do to show advisers and their customers the value of the protection products and services that are available.
"Providers need to think more about how they can help equip advisers to have these conversations with their clients."
According to Thirlaway, there is an equilibrium between the advantages of consolidation and the advantages of diversification, and while these are in the balance, there are factors that will affect the balance, such as regulation, technology and the economic environment.
"On the positive side, fewer insurers lead to better compliance, oversight and operational efficiencies. From a regulatory supervision perspective, it is easier to keep an eye on fewer, rather than more, participants", she said.
But she added: "However, business model diversity is vital.
"We all appreciate that different consumer needs can be met by different solutions. And competition naturally is the driver of innovation and pricing policies, so maintaining competition in the marketplace is core to a functioning free market."
Changing marketplace
Also speaking in this session was Paul Yates, product strategy director for iPipeline, who showed how the marketplace had changed over the years.
Answering a question posed by Miller - "does an abundance of choice lead to better outcomes, or to overwhelm for advisers and consumers", Yates said: "We have seen a lot of charges and retreats since the 1990s."
Big changes to protection in the UK included the loss of the direct, door-to-door salesforce and the retreat of banks from direct-to-consumer insurance products.
Yet even though big names such as Equitable Life have disappeared, newer entrants have come into the market recently, taking advantage of new technologies and an emerging tech-savvy younger generation.
While a gap of nearly half a million no-longer-insured people has emerged, which Yates said needed to be addressed, he showed data from iPipeline that indicated while providers may have changed over the years, the number of products has risen - by 80 per cent since the launch of iPipeline.
"So perhaps the market is competitive or maybe even more competitive. And most of the term products over this period have gone down in price, over this period, even considering Covid.
"So it sounds like a competitive market to me".
Strategic fit
A further speaker, Carrie Johnson, customer lifestage director with responsibility for protection at Royal London, spoke about the reasons why Royal London has made strategic acquisitions over the years, and what were the outcomes.
She told attendees: "There are costs in setting up a M&A deal, and you need to consider the positive profit profile in the protection business.
"Is the purchase going to improve customer outcomes? Is it going to be a good cultural fit? Is it going to be a financially sound decision?"
She said while scale improves financials, it also has to be good for customers.
Johnson said: "Scale really does help - it makes a difference now in the market if you have scale.
"It is also better to get bought by a protection provider who has the capability to support the integration.The financials have to be a lead driver - we still are here to make money at the end of the day - and the sustainability of those financials is vital.
"What you can see with the demand on providers for technology and service, is that you need to have the scale and financial returns that will enable you to put that investment in."
A panel session then followed, debating some of the themes brought up by the three keynote speakers.
