Annual statements would help advisers to sell more protection. Adam Higgs reveals how.
The Retail Distribution Review (RDR) has provided advisers with many hurdles to overcome. While the changes were not aimed at the protection industry, the repercussions are still being felt.
Many protection advisers are well aware that to prevent a protection RDR, they need to be able to demonstrate to the regulator that they provide an ongoing service to their clients in cases where ongoing commission is being received. Gathering the information to do this, however, is a time consuming and manual process, especially when multiple insurers are involved.
In contrast, investment advisers can usually expect to receive an annual statement each year, informing them of their client's current value, percentage change from the previous year, projected values and a transaction history. It seems strange that a similar statement has not been produced for protection policies.
In the past year, F&TRC's protection forum has run a number of discussions between advisers and insurers about future development priorities for technology in the protection market. Participating advisers have been adamant that annual statements are their number-one requirement, because the introduction of these will enable them to sell more protection cover to their client.
Filling the gaps
The rationale behind this is simple. Preparing for an annual review meeting will be much easier if they have a statement for each policy that tells them not only what the current sum assured is but also how inflation has affected this, and the options available if they wanted to increase it without further underwriting.
Just knowing this simple information could help them to assess whether the client has adequate protection in place, and if not, the options available to fill the gaps.
Ideally, this information would be pre-populated into the adviser's client management system electronically, enabling them to view updated details of all their clients' protection plans in one place.
Such pre-population should include data such as whether the plan is actually still on risk and whether the premiums are paid to date to ensure adviser confidence. However, these data fields are present in most client management and insurer systems already.
Such a service has enormous potential to reduce the time taken in the preparations for annual review meetings. The ability to produce an aggregated annual statement at the touch of a button would make it possible for advisers to conduct far more meetings with clients to review their protection arrangements.
Yes, advisers can visit the insurers extranet for information on the plan, but most provide only static information on protection policies such as the sum assured at outset, premium and details of the life assured.
If an adviser is looking for more information than this, they will more often than not have to make a call to the provider and this can become time consuming if the client has multiple different plans with different insurers.
In a post-RDR environment, where advisers are constantly battling to introduce more efficiencies and streamline their processes, this is no longer acceptable.
The Contract Enquiry messages used to populate adviser systems with information such as investment valuations have been a standard service for most life offices for over a decade, however few (if any) have actually implemented the Protection Contract Enquiry standard.
The work that was carried out to create this standard is now more than ten years old, and clearly additional data sets will need to be added, however, the demand from advisers for messaging of this type is greater than ever.
To ensure advisers' adoption of the new services, it will be important that a clear strategy for the implementation of such a service is agreed in advance with adviser software systems. These organisations as well as insurers and advisers need to be involved in the planning.
In the interim, some electronic mechanism to deliver annual statements should be seen as a priority for all insurers in order to help advisers better service their clients.
The real issue here is that once a protection policy has been put on risk, the adviser and indeed the client, receives hardly any ongoing information from insurers.
Providing such information to the advisers, especially if it includes details of the benefits of the plans such as Guaranteed Insurability Options, can only benefit insurers because advisers will be more aware of the options available and therefore more likely to exercise them.
The protection annual statement issue is one that will continue to be vigorously debated between advisers, insurers and software vendors, but it will not go away.
If we do not find a way of implementing such a service, our industry leaves itself open to charges that we are not servicing customers as best we could.
Adam Higgs is a research consultant at the Finance & Technology research Centre (F&TRC)
