With price comparison websites growing in number, advisers should take advantage of their own IT systems, despite greater regulation, Andy Valvona explains.
The introduction of price comparison websites into the UK protection market has had a seismic impact on advised sales of products. According to Mintel's Web Aggregators in Financial Services report in July 2011, as many as 60% of people in Britain are most likely to use such sites when researching or buying a financial product.
While it is encouraging that many people are taking an interest in their own financial wellbeing as well as their family's, many sites focus too much on price and do not articulate the different levels of cover sufficiently enough.
There also seems to be an obvious but very real correlation between execution-only/non-advised sales and instances of unsuccessful claims.
Price will often be the path of least resistance, but it is important for consumers to understand that opting to take out the cheapest policy may present limitations in the instance that they may have to claim.
MAN V. MACHINE
This is where an adviser's knowledge and experience can prove invaluable. It is often the case that sufficient cover is not fully appreciated until a client needs to claim but does not meet the criteria.
In addition to ensuring that the most suitable product is selected, an adviser will also take care in making sure that research is documented, not only from a compliance perspective but also so that clients are aware of what the selected product has been designed to do and - perhaps equally important - what it does not cover.
There have been a number of attempts to reduce the protection gap in the UK and to promote protection to a wider audience, including COVER's Promoting Protection campaign and the recent Protection Awareness Day. In addition, high-profile media coverage of providers' failure to pay out on claims could be seen as a positive factor as consumers become aware of the effect of policy exclusions.
Increasing consumer understanding of products such as income protection, critical illness, and accident, sickness and unemployment (ASU) is the foundation of raising awareness of protection to a wider audience and ensuring cover in place meets the needs and expectations of clients.
It has been a while since the FSA sent out its ‘Dear Compliance Officer' letter to all firms selling non-investment insurance protection products - 29 November 2010, to be precise. In this letter, the regulator reminded firms of their obligations following its post-implementation review of the Insurance Conduct of Business Sourcebook (ICOBS), which was published in June 2010.
