Discussing Research for the Protection Review, Jonathan Gunby a director at NMG Financial Services Consulting, noted that the growth and profitability of protection products, on the whole, does well and passes the parent company’s targeted rate of return on capital. In addition growth is good in comparison to other product areas.
He added: “And yet we have providers throwing millions into retail platforms. All that money, which is showing really low returns has flooded the market and we can expect consolidations.
“So protection is good business and is profitable, only surpassed by offshore international business. Group risk is also doing well as a product line.”
The distribution picture is less sunny. Gunby pointed out that, distribution businesses are facing a tough housing market and a big protection gap.
He said: “NMG research on people’s propensity to buy things online, both protection and wealth products, shows a generational shift. We can expect these purchases online to grow exponentially,”.
“In terms of broker competition we are seeing new distribution models within the comparison sites.” He added.
“We work with a couple of aggregator sites and are constantly amazed at how quickly they can move. Many direct models fail through acquisition costs, however aggregator internet sites are currently giving in the region of 10.7 million motor quotes annually, and over half of all policies are bought online. These sites can, and will, cross sell to this audience for nothing.
“Most aggregators are currently testing in the protection space. For example one decided to be in the over 50s market and took only five weeks to do so. The process was horrible, but it had a start.”
