News Review: Protection


It’s time to update the tired old product set by


Alan Newman, psychologist and


management consultant, The Finance IT Network


Protection. It begs the ques- tion: “Protection of whom from what?” And a focus on products rather than cli- ent needs does not provide us with useful or appropri- ate answers. Supposing we could get a bunch of about a hundred fi nance profession- als together and ask them how they thought their cli- ents would complete the sen- tence beginning, “Most of all, I need to protect...” In par- allel we get a hundred con- sumers to do the same thing. How much agreement do you think there’d be between


the two sets of responses? In a recent project in


which I’ve been involved we looked at the products that thousands of customers had actually


bought from the


same IFA. What was it that these folks most wanted to protect? You can forget the bland clichés about “wellbe- ing” and “lifestyle” – they’re industry speak not consumer speak. First and foremost these consumers wanted to protect their children’s edu- cation. They’d re-mortgage their home, cut back on pen- sion contributions, skip holi- days, or dip in to savings to protect this item of expendi- ture.


But we don’t hear much about this because “Protect- ing My Children’s Educa- tion” is not a need on which


the protection sector focuses in the main. Some consum- ers in our study wanted to protect themselves from themselves; or they wanted to protect some members of their family from the shenan- igans of other members of the family; or they wanted to protect the vulnerable mem- bers of their family from the hassle, pain and complexity of death and/or divorce. This was the real world. These were the issues that were front of mind and urgent. And in the emotion-driven brain urgent trumps impor- tant every time. Several months ago I was at a gathering which, in the main,


comprised insurers


and IFAs. One of the pre- senters made a passionate and persuasive case for criti-


cal illness cover; another did an equally good job extolling the virtues of income protec- tion. Listening to these folks it dawned on me that the ma- jority of consumers needed a hybrid product that, to use a bread analogy, was the best of both worlds with an option to top up one element or the other. I know I’m not the fi rst person to make this observa- tion; and I know that there are a few companies out there offering such a hybrid. But for protection, familiarity breeds favourability and the hybrid will only catch on if it’s the mainstream product rather than an exotic. It’s time to update the tired old product set: and it’s time to focus on the emotions of people rather than the logic of fi nance.


Simplicity is the name of the game for protection


by Peter Le Beau, managing director, Le Beau Visage


There are some people in the protection industry who genuinely believe that the introduction of simple products will see more protection sold than we have hitherto ever experienced. I hope they are right but I do have misgivings. They are based on the fact that the word


‘simple’ is not


well understood in the life assurance industry. It’s an endemic problem within fi nancial services.


If I had to I would blame a mixture of regulators, compliance people and actuaries (I blame as much as I can on actuaries). But although I might appear to be approaching the problem humourously it is a really important issue that the protection industry has to come to terms with. The Treasury is mounting a long overdue initiative to simplify fi nancial services. I believe that part of the trust problem that has sprung up between the public and insurers springs from the fact that people don’t like to part with hard earned cash without knowing where it’s going and what they might receive in return. The longer


22 MORTGAGE INTRODUCER APRIL 2012


policy documents get and the more complexity that is introduced into policy wordings the less they understand. We have now got a


chance to rethink what we really need to cover and how we explain what our products do. A simple income


protection policy


will have to be for a shorter benefi t period, cover a fi xed percentage of income and cover you against not being able to do your current job. It should have no exclusions and it should be very easy to buy—like general insurance. This means looking at how we make the underwriting simple which is a task that has proved beyond us thus


far. But this is the sort of mindset we need to have if we are ever going to penetrate the mass market and really ensure that we help people to cover things they care for.


the


Imagine being able to sell a product like this to help people protect their mortgages. Ah yes, I hear you saying we had something like that called PPI. That was easy to buy and simple to understand and it’s been a disaster. Let’s learn what made that so unsatisfactory and make sure that simplicity


equates with


transparency and fairness. It might cause apoplexy among some product engineers but it’s time for a new era.


www.mortgageintroducer.com


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