Taking the lead

Before diving into the detail, an initial inquiry finds Peter Le Beau satisfied with this years Protection Review conference. Aside from the fundamental, and eternal, wish list of slicker and more streamlined products, with easier and more intelligible processes, there were more points raised concerned with marketing the industry as a whole.

Le Beau, the co-chairman of the review says: "There was quite a lot of coherence that was both encouraging and a bit of a relief when putting these things together.

"One of the things we were looking to explore was the effect going forward of having a new government in place. There is a chance that it would have a new attitude to insurance and there could be a possibility of a partnership in some area.

"Now, just because the Government is willing to work with you does not mean the problem is solved. We would still have to decide as an industry what the issues we should be talking to the Government about are, and also to decide what sort of partnership we would forge."

This raises the obvious point of how to start the ball rolling, who is to lead that process? It is not obvious in the protection industry quite where the leadership comes from. One of the three themes the Review raised was forming of a pan industry organisation promoting protection.

This grows in importance when hitched to the second theme; that there is an opportunity for the industry to step in and either add to, or replace, state benefits, in cooperation with the Government.

Le Beau is sympathetic to such an organisation as long as it embraces all concerned parties.

"It shouldn't be seen as an attempt to cut out the Association of British Insurers (ABI) or the Investment and Life Assurance Group (ILAG), all these parties should be part of such a organisation.

"We tend to have a default position in this industry that the ABI leads initiatives. I've got a lot of respect for the ABI, but the concern over the ABI leading such a move is that it is not a natural discussion partner with the adviser sector. Advisers would be very important in this," he says.

The conference suggested the first target for the new body would be an idea to outsource a form of income protection benefits to the insurance industry on a pooling, non underwritten, basis. This would in effect privatise certain aspects of the benefits system, although it could also be seen as an added extra to existing benefits..

Of course, it does not take a psychic to see a few pitfalls in agreeing to this process. Le Beau says: "We could set up an appropriate body, but we would need a fair degree of agreement over what the end result was to be. If you look to advisers a default disability scheme like this is not particularly attractive to them as it would not really involve them to any degree."

So would this in effect cut advisers out of a slice of their present market? "I still think there is a huge opportunity for the adviser community to sell other products, but there are still those members of the public who would think the state was looking after them even better than before and why should they worry about private insurance. These are concerns we would have to allay," says Le Beau.

This all pre supposes that the Government is at present disposed to such a scheme. The conference saw Professor Sir Mansel Aylward, of Cardiff University and an architect of the current benefits system, ditch his prepared speech and give an impassioned off the cuff plea to the industry to "get its act together" and talk to the Government.

So is this a pipe dream? Le Beau thinks not; "I think Mansel Aylward's words were very wise. He is extremely well connected and has had conversations with those responsible for welfare reform and he senses a willingness to look at opportunities that might involve the insurance industry. He also feels that the industry is now more acceptable as a partner, which is new."

So it could happen? Le Beau says: "it would have been better to actually come up with a basic costing and then talk about the idea, but I think the principle is that both the pricing and the benefit need to be simple in order for people to understand it.

"One of the themes that came out of the conference was that we make things far too complex and we need to simplify if we are not to lose the public."

Which leads us to the third notable strand of the day: Andy Milburn, head of marketing at Munich Re raised the possibility of the sector gearing itself towards products for the less well off. He noted financial exclusion was a problem for the industry and there was nothing realistically to offer at the lower end of the market.

Le beau agrees, quoting the demise of the direct sales force going door to door. "It has not been easy for blue collar workers and low paid workers to locate with the industry, the industry does not really seem interested in them. I think Andy has a good point."

He adds that the problem may get worse; "What worries me is the potential cut in funding to organisations such as the Citizen's Advice Bureau. With the cuts taking place this could even get worse. What we need to do is take forward the work Otto Thorensen did on money guidance. There is a big market out there."

Some of the research carried out for this year's Protection Review indicates that this group is even more interested in being covered than those with higher incomes. "Companies have to become a bit more interested in insuring a larger number of people for a lower amount," adds Le Beau.

"But we need to have the products first before trying to educate people, so we can tell them why the product is there for them."

However, the inevitable fly in the ointment is that Protection Review research shows the British public as a bit reticent in committing themselves to large financial transactions. "It shows a real lack of confidence. I'm also concerned about the education issue. We can put education in place but we can't make people engage with it. It has to be interesting enough for people to do that," says Le Beau.

The front line for all this will be, as ever, the adviser. To this end Le Beau sees the need to get a lot more advisers involved with the protection markets. "This involves training and education as well, because, certainly in my experience, when it comes to Income Protection, for example, advisers have a very hazy knowledge. Some of the people we see on the Income protection Task Force Road Shows confirm this. Adviser education is as big an issue as public education."

But do the providers in this sector who, as a whole, have protection as an annex to their main business care that much about protection? Le Beau chooses to split this question into two, emphasising that within the ABI there is a desire to make protection a significant focus.

However he also admits; "Sometimes when I am sitting on the IP Taskforce, I get the feeling that there is not an awful lot of belief in what we are doing. Providers seem to be more interested in what their competitors are doing, rather than what they can do themselves. This is a problem in any industry, you get a few leaders and the rest tend to be followers.

"Another concern is the FSA has recently made it clear to me recently that it did not have anything to say on the subject of protection. How a body like the FSA can have nothing to say on this subject is unbelievable. There should always be an ongoing policy with something as important as protecting the finances of the UK public.

"The lack of leadership in this area is fundamental. If the FSA had taken a strong lead I think the industry would have been inspired to follow suit, so some of the blame is at its door.

"We are talking about tackling a problem here, and the new regulatory regime has to do this."

So what, in conclusion, should the adviser take from this year's Protection Review?

"The main thing to grasp is the huge opportunities in this market," says Le Beau. "There are a huge number of uninsured people with real needs and any basic fact find is going to expose those. We just need to make people more aware of the consequences if we don't do that, and maybe we are a bit frightened to do that.

"The Widow's Tale was an absolute classic of its type and perhaps we need a 21st Century version of the Widows tale."