Senior partner at CWC Research and co-founder of the Income Protection (IP) Task Force Clive Waller tells Johanna Gornitzki why IP is still the golden product of the protection market
It is hard to imagine that someone as successful as Clive Waller began his career by selling vacuum cleaners door-to-door – and that he may still be doing so today if he had not met one particular girl.
He explains: "I started selling vacuum cleaners when I was waiting for my exam results, and since I was making good money I just carried on doing it. However, my first serious girlfriend's father did not approve of what I was doing, so I took the plunge and joined Scottish Amicable because they were based in the City."
After spending most of his adult life working for various insurance companies, Waller decided to launch his own firm, CWC Research.
Corporate nonsense
"I had simply had enough of politically correct speak and all that nonsense you have to put up with in corporate life, so I decided to create my own business," he says.
CWC Research was launched seven years ago and is run by Waller and his wife. It is a virtual company that provides research material to insurers, reinsurers and other players in the market.
Waller's vast experience in the financial services industry, together with the fact that he is now an independent agent, makes him ideal to talk to when it comes to market issues, as he does not mince his words.
Looking at the protection market over the past couple of years, Waller expresses great concern over the falling number of real sales in the sector.
"Over the last few years the market has mainly experienced rebroking, while the actual level of new business has collapsed," he says.
This is a long way from how insurance was sold in the past, adds Waller, who is worried that the protection market is relying too heavily on the mortgage market.
He says: "If you go back perhaps 10 or 15 years, selling life insurance was almost the start of a relationship between brokers and their clients. Now, the vast majority of protection policies are merely sold as a bolt-on to a mortgage. And this is wrong. Protection should be sold on its own basis."
While Waller strongly advocates all protection products in the market, he is particularly keen on promoting income protection (IP). He thinks this product is hugely underestimated.
"It is the key insurance product and it is the key investment product, because if you haven't got your income guaranteed you can't invest. That is why it is absolutely essential," he argues.
Waller's interest in the IP market led him to start thinking about creating an independent IP working party. And two years ago this dream turned into reality when, together with Peter Le Beau, managing director of Le Beau Visage, he founded the IP Task Force in the hope that it would help to get IP the attention it deserves.
Waller believes this can only be done by raising awareness. "The ultimate aim of the IP Task Force is to increase sales of the product, but to do that we need to increase awareness not only among consumers but also among intermediaries," he says.
Advisers in particular need to be educated, he adds: "I don't think advisers know enough about the causes and nature of disability. You always hear people talk about cancer and heart disease, but never chronic arthritis, for example. But far more people suffer from arthritis than from cancer and heart disease put together. And the latter conditions rarely cause long-term disability. But that is when the real problems arise – for example, when someone can't work or won't be able to work.
"So it is about getting advisers to think about both the nature of disabilities and how their customers would manage without an income," he says. "Because if the adviser believes in the product, they will sell it."
Waller also thinks the media could do more to explain how IP works. "People do read the financial press, so if you mention IP in the same way you mention ISAs or pensions, I think that would be incredibly helpful."
That said, he admits the industry also needs to review the product itself. "At the moment, it is very complicated," he says.
Waller reveals that the IP Task Force will be looking at ways to simplify IP, and that it will produce a white paper which will be published by the autumn. This will outline what the Task Force thinks needs to be done.
One of the biggest threats to the IP market is the bad press its inferior cousin, mortgage payment protection insurance (MPPI), is currently receiving. On the surface both products look similar, and this has caused confusion among consumers, with many believing that MPPI and IP are the same thing. And MPPI providers have not done much to make sure people distinguish between the two products.
"If you go onto the internet and type in IP, what do you get? MPPI," Waller says.
But while MPPI and IP may have some features in common, Waller argues that the protection they are offering is far from similar, with the former being unsuitable for the majority of buyers.
Attacking MPPI providers' selling practices, Waller says: "Regardless of what I say, I have had a lot of banks trying to flog me MPPI. And even though I say I am self-employed and that the cover wouldn't suit me, they still recommend it. They also use words like advice although they are not giving any, and they refuse to tell me what commission they get. And when I say, 'Wouldn't IP be better?' they say, 'No, IP would not be good for you because there is a limit on it.'"
Terrifying profits
Waller adds that it is also hugely overpriced. "It is terrifying the amount of profits that banks make on the back of MPPI," he says.
The Financial Services Authority (FSA) is currently undertaking an investigation into this market. Waller applauds this, but says the regulator could do much more.
"I don't know how bad this business has got to be before the FSA will do something about it. Yes, they talk about it, but if they really wanted to sort it out they would sort it out," he says.
Despite hoping that the IP market is about to flourish, Waller is not overly optimistic about the future. The only thing he thinks could have a short-term impact on IP sales is the FSA's Treating Customers Fairly initiative.
He explains: "If you really want to treat your customers fairly it would be extraordinary if you recommend critical illness and not IP in most cases, so sales of IP should really blossom if firms start to adhere to the rules."
However, he doubts this will have a major effect on sales. "In truth, I don't think things will really get better until it's newsworthy. Sadly, it is not until politicians get their act together and realise that there are real problems that protection products will be at the top of the agenda.
"Until then, unfortunately, I struggle to see change," he concludes.
