LifeSearch, a UK
protection intermediary, has warned against the poor industry
selling practices of other distributors and the “laissez faire
approach to the quality of distribution” by some product
providers.
Speaking at its annual
awards event in London, Tom Baigrie, CEO of the Baigrie Davies
LifeSearch group, said: “At LifeSearch we fear that, with RDR
approaching and premiums set to rise, our market may well attract
many new start-ups, some of low quality.
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“We also fear that
provider eagerness for market share will accelerate the already
endemic granting of agencies to dodgy distributors, who are allowed
to flog great brands and good products awfully. A client ripped off
by one of these will hate our industry forever, and so you must
stop the laissez-faire approach to the quality of your
distribution.”
Concerns over
quality
Advisers have expressed
concerns over the years that life offices grant agency terms to
easily, without properly measuring the sales process and the
quality of business being written.
While some providers
have implemented more robust methods of doing so, it is claimed
that others remain primarily interested in quantity over
quality.
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By GlobalDataThe FSA has also warned
of what the regulator refers to as the “migration” of advisers and
sellers who typically have not specialised in the protection field
in particular, as protection remains outside of the Retail
Distribution Review (RDR) which means commission also
remains.
In a bid to rectify the
situation, the firm is seeking feedback on a new code of conduct
for protection sellers, which would in theory apply to all forms of
distribution:
- Those selling critical
illness cover must explain its limitations in line with the FSA’s
requirements.
- Those who choose to
highlight terminal illness benefit as a product feature must
explicitly state its limitations and ensure it is not confused with
CI cover.
- Those choosing to
discuss total and permanent disability cover and income protection
must explain the definition of disability on which the policy will
pay out, such as, own occupation or activities of daily
life.
- Those selling
PPI/MMPI/ASU must make the standard exclusions clear to customers
and must mention longer-term IP as a viable alternative at some
point in the sales process whether they offer it or not - Sellers must clearly
state at the outset whether they provide regulated
advice.
- All sellers must
demonstrate they have properly provided for the repayment of
indemnity commissions on lapsing policies.
The aim is to cover both
non-advised and online sales too, without going so far as to create
a whole new rulebook for advisers, and the advisory firm says its
provisions can easily be met on websites, face to face or in
telephone conversations, whether they are deemed by the FSA to be
advised or not.
Baigrie added: “I hope
to get insurers to agree that it is sensible to set minimum
standards and that they ask all their agents to sign up to and
honour in practice a final version. That is basic self-regulation
and that is the very best way of avoiding the destruction the
regulator has already inflicted elsewhere.
Or to put it simply, so
long as we stop dodgy distributors from jumping on it, protection
has a great future.”
Implementation
Should insurance
companies agree to implement the code, how it is monitored will be
crucial to its success.
Most insurers already
claim to have checks in place to monitor the quality of business
being sold through individual distributors.
However, advisers are
often keen to quote their own experiences of customers not always
being treated brilliantly by competitors who just want to flog
cheap cover with little regard for quality or
suitability.
There is no doubt that
the market has seen an increase in sellers of protection
whose
model is based primarily
on price, be it advised or non-advised.
Nevertheless, with
prices set to rise at the end of the year due to gender neutrality
and a
range of other changes
(I-E, RDR etc) switching policies to save money could become
a
thing of the past, which
makes the timing interesting.
With the possible advent
of simple protection products, driven by the regulator and likely
to be sold without advice, perhaps now is the time for the industry
to draw a line and agree a set of basic standards.
Protection Review
was established to provide expert independent commentary on
the
life and health
protection markets
