What does the Sergeant review mean for the group market? John Letizia believes it is a spur for growth.
• Acumen
Even with the simplest possible IP products, it is perhaps inevitable that consumers will have additional questions about their proposed policy before signing up. Unfortunately however, as a consequence of the banking crisis and banking-led scandals such as PPI, the whole of the financial services market has been tainted by association in the minds of many consumers.
The current reality is that many individuals will be wary of trusting advice from product providers. Making simple IP available through the workplace could be one way to help this with the implied third-party credibility from the employer. HR departments would also be able to act as a trusted source of advice for employees who may have additional questions about their protection policies.
The simple products review has the potential to be a significant landmark moment for both the IP category and the broader financial services market. But, ultimately it will be the consumer response to the suite of new simple products that proves to be the acid test of the review’s success.
Particularly in the case of IP, where there is a significant knowledge barrier to overcome, it is vital the product is well conceived from the outset. In the long run, it will be infinitely preferable to come out with the right product, rather than to bow to short-term industry pressure and not end up with the right product structure.
Reputation of IP
So, how will the Sergeant Review affect the reputation of the IP category? One effect of the recession is that consumers are increasingly concerned about their finances (Unum/Populus research shows that 77% feel less financially secure as a result of the downturn).
So there is a market for protection policies to help people feel more financially secure. However, Unum research also shows that the insurance industry is ranked second only to banking as the worst offender for making product information difficult to understand.
In that context, the Sergeant review’s stated aim of helping consumers navigate a confusing financial services market becomes very important. By providing a concerted impetus to address poor consumer perceptions of the industry, the review can help IP providers to capture latent market demand, re-engaging people with the industry and helping to grow the entire sector.
In addition, valuable as simple IP will be, it is worth remembering that the full range of protection requirements cannot be covered by the accredited simple products alone.
If successful, simple IP should become a yardstick against which more specialised bespoke advice can be compared, allowing professional advisers to demonstrate the value they add beyond needs catered for by entry-level products.
A new simple IP product should therefore prove to be in the best interests of consumers, employers, providers and advisers alike. The real work is just beginning. As an industry we will need to capitalise on the report to ensure the potential of simple products is fully realised.
John Letizia is head of public affairs and CSR at Unum
