News Review: General Insurance
Advisers should ignore RDR concerns at their peril the FSa has made it clear by
Kevin Paterson, sales and marketing director, Assurant
We recently commissioned some independent research amongst intermediaries to find out more about their attitudes towards general insurance and their views on the future of their businesses. unsurprisingly enough, the retail distribution review was well up the rankings when it came to causes for concern. the rdr is undoubtedly
going to present challenges to
advisers selling
investments and pensions, but general insurance – non-investment life in particular – is also on the radar. i think advisers would be mistaken to believe that that it will only be confined to the retail investment market in the long term.
that there are a number of areas of ‘read-across’ within the rdr that will impact on the mortgage advice sector. You would be well advised to start planning for this now. indeed, the FSa has made no secret of the fact that it has always disliked commission and would ideally like to see it removed from the landscape. rdr is the first step on this road. taken to its logical conclusion, client-agreed remuneration and factory - gate pricing will be applied to mortgage products as well as protection products. to simply assume that proc fees and protection commission will always be there is, i believe, a mistake. the main hurdle to
overcome for those selling non-investment
general
insurance is going to be the conversation with their clients when it comes to charges. it’s likely that clients will more easily accept that they have to pay upfront
Price vs quality. It’s a tough one. When it comes to football, it would appear that the leading clubs and their fans seem to share the same view – you get what you pay for and so they’re happy to pay millions to get a leading goal scorer striker or the best keeper in the business.
Sadly that doesn’t translate into the real world when it comes to consumers buying general insurance. The rise of price comparison sites has facilitated the consumer’s ability to compare prices like never before. According to Mintel, 26 million people always shop around when a policy is due for renewal to find a better deal. Many general insurance products have become commoditised, and there is little correlation between the cost of manufacturing an insurance policy and the price the market is willing to pay. This represents a challenge for intermediaries.
14 mortgage introducer JULY 2010
for investment advice. However, they are likely to baulk at paying for advice on protection or in deed mortgage advice. they’re more familiar with the idea of commission and, just as in all walks of life, the majority resist change. this could put some off
advisers protection, although
selling i
doubt it personally. i have long been an advocate of intermediaries charging their clients for the knowledge that they pass on. after all, it has taken them years to acquire this knowledge. in this time they’ve amassed an abundance of experience that no sourcing system or comparison site can ever teach.
if intermediaries
can continue to sell (albeit nervously) mortgage payment protection insurance in the current media maelstrom surrounding the product, then i think they’ll manage the difficult conversation with their client.
According to the research that we recently undertook, brokers view the quality and extent of coverage of policies as being more important than price when recommending products to their clients.
Selling general insurance is not different to arranging a mortgage – it’s all about making sure the client has the most suitable product to meet his or her needs and budget. It is a challenge when the consumer is only interested in how little they can get away with spending. However, this is where the value of advice and experience comes in. There can be few consumers who really read the options presented by that friendly meerkat. An adviser, however, can provide a detailed picture as to why it might be better to spend a few pounds more on a product. This could, of course, increase their earning from the conversation as well!
To ban or not to ban, that is the question …
At the time of writing, we were still awaiting the final recommendation from the Competition Commission following its never-ending inquiry into the payment protection insurance market.
Its research indicate that while a significant number of customers appreciate the convenience of buying PPI at the point of sale of a credit vehicle such as a mortgage, others place very significant value of being given the time and space to choose whether to buy PPI. Interestingly, however, is the Commission’s silence on the subject of mortgage payment protection. While it has gone to great effort to confirm that MPPI has been mopped up during the course of the inquiry to be part of the final proposal, it appears that thought has been given to the practical application of a ban when it comes to buying protection to cover mortgage repayments. What constitutes the point-of-sale in respect of a mortgage? The signing of the application? The issuance of the mortgage offer? Or the completion of the transaction? As mortgage advisers will likely discuss protection options at various stages of the process, clarity as to how the commission defines point of sale would be useful!
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