Challenging economic times mean many people are having to cut back on, or do without, certain luxuries due to the tightening of purse strings as a result of economic uncertainty. In many cases these changes in attitudes to spending are no longer being limited to luxurious items. Many people are simply trading in ‘branded’ goods for ‘value’ alternatives in the supermarket or swapping an overseas holiday for a ‘staycation’. Cutbacks are necessary but in the right areas – it is important that people do not overlook the necessities.
Unfortunately, this is not always the case, especially when it comes to insurance. A survey from the Association of British Insurers (ABI) shows almost a quarter of people admit to cancelling or not renewing their contents insurance in order to save money. Other types of insurance cover are also reported to have been ditched due to cost-cutting.
The survey also highlights that 17% say that they have cancelled or not renewed their buildings cover. In Scotland, the figures rise to 28% for contents and 21% for buildings, and 13% have cancelled their life insurance. One in five (21%) say that they are seriously considering reducing or stopping saving.
These statistics make interesting reading and there is no getting away from the fact that the recession continues to impact massively on vast numbers of the UK public. However, when it comes to the protection market it is not only the past couple of years that have seen a dip in sales. According to the recent 2009 Protection Review, protection sales have fallen dramatically since 2000.
Speaking at the 2009 Protection Review conference, Andy Couchman, protection consultant and co-author of the review, said overall sales of individual long-term premium protection products had fallen by 15 per cent in the last eight years.
Standalone critical illness was the worst hit, with sales currently standing at 27.3 per cent of the amount that was sold in 2008. Comparatively, in 2007 standalone critical illness sold 85.9 per cent of the volume it had in 2000.
However, on a much more positive note a recent survey of members of the Personal Finance Society, in conjunction with Protection Review and Fineos, highlights a renewed focus on protection amongst financial advisers, with 63% of members believing that the importance of personal insurance has increased as a result of the current economic turmoil.
Interesting research findings included:
• 76% of advisers tend to agree that clients are thinking more about their protection needs. However, the financial pressures on consumers are evident with 67% of advisers tending to agree that clients are often looking to cut premiums or discontinue cover altogether;
• Over 70% of respondents agreed or strongly agreed that their clients have less trust that the State will provide;
• 85% of advisers tended to agree that raising consumer awareness would be the most likely action to help increase the levels of protection insurance amongst consumers. 84% also tended to agree that lower premiums would have a similar effect;
• Advisers tend to agree that they are still not getting the levels of service they expect from insurers, with the biggest issues being ‘time it takes insurers to get medical evidence’ and ‘the time taken to resolve admin queries’;
In response to this, Fay Goddard, CEO of the Personal Finance Society, commented: “It is clear that the economic downturn has refocused the attentions of advisers on their clients’ protection needs. Our sense of health and mortality inevitably becomes sharper when we are surrounded by financial turmoil, and protecting our loved ones becomes a higher priority. As you might expect, the survey shows the cost of insurance is even more important this year and advisers clearly expect insurers to do more to increase consumer awareness of the importance of personal insurance protection.”
It is good to see advisers are experiencing more protection enquiries, but these need to be transformed into sales. It is also fair to say that advisers expect providers to increase consumer awareness but it is up to advisers to increase their knowledge and make their clients aware of the benefits. Advisers should start the advice process having collated sufficient information so they can begin with an indicative insurance quote upfront. This will ensure that the client is fully aware of the total cost of a mortgage and all the products and premiums linked in with this rather than starting at a low price and adding the costs of the premiums to this. I call this the Ryanair approach as all the added extras tend to annoy and frustrate the end customer and they come to see them as just expensive ‘extras’ rather than justifiable and necessary products which will work to protect them. By starting at a higher inclusive price this means the adviser can work to justify each individual premium and illustrate their worth by going through the whole process to discuss individual requirements in order to come to a correct, and generally speaking, matched budget conclusion.
With ‘pure’ mortgage business drying up somewhat, it has been well documented that brokers must diversify in order to open up new revenue streams and the protection sector is certainly one that should continue to be investigated. Despite the somewhat contradictory anecdotal evidence previously highlighted and growing consumer financial concerns, the protection market remains highly competitive in terms of price and service and with people thinking of cancelling cover this could provide the perfect opportunity for intermediaries to expand their protection offering.
By choosing the right insurance providers brokers can access really good deals for their clients. But again it remains up to that individual adviser to ensure that they are fully up to speed on market developments, products and services by upping their knowledge by becoming a genuine expert in the life industry. Having access to this bank of expertise and communicating it in a way that conveys there is no excuse for people to ignore or reduce such cover will ensure that these products remain low on the list of things to cut when evaluating overall monthly budgets.
To get the most out of any market sector it is imperative that a firm’s fundamental sales process is securely in place. Getting back to basics and improving sales performance is an integral part of the driving a business forward. This can be done by treating customer service as an utmost priority by concentrating on being the ‘champion’ of service at all times. This can be achieved through a variety of simple things such as returning calls, delivering on all promises, good timekeeping, being accommodating when it comes to arranging appointments, keeping in regular touch with clients through holding seminars, coffee mornings, problem surgeries, and newsletters. Find out what works for your clients in terms of keeping in touch. Attention to detail after the actual sales process can also improve firms’ retention and referral levels and set them apart from their competition. In terms of protection something simple like placing the insurance documentation into a folder marked Family Protection and delivering the actual policies to the client can help strengthen relationships.
It’s not only the clients that require attention. Forming good relations with the providers can help ensure business and valuable trail commission is not lost. Firms can ask providers to let them know if their client has missed a payment or intends to cancel a policy so they can contact the client directly to try and save any possible lost causes that may have gone unnoticed for too long to salvage otherwise. Firms should also make provision for possible claw-backs so they are not caught out cash wise.
Intermediaries may also choose to establish a link through a reputable and well-established mortgage club that will have suitable relations with an array of providers who can deliver this seamless link should individual firms have insufficient knowledge of a particular area of the market. These relationships work both ways and should add value to a firm. Getting the right sales in place is half the battle but it is as important to make sure this professionalism isn’t lost by relationships with poor providers.
As well as targeting new clients, intermediaries should also maximise the business potential of existing client banks. Costs of term assurance are getting cheaper so it may be possible to re-broke clients in simple term assurance cover and this is an area that could be explored immediately. Making a modest investment in a client management system that can flag up any clients that have taken on a mortgage in the past but for whatever reason didn’t take life cover can also work well as circumstances change and they may be more willing or able a little further down the line. There are a number of ways to utilise the protection sector many of which are simpler and less daunting than they first appear. Combining some degree of knowledge with a steely determination and persistency can really make this sector pay for you, the intermediary, and for your client. In troubled times this could well prove a win-win situation for all.
Phil Whitehouse, head of The Mortgage Alliance (TMA)
