Kirstie Redford talks to Peter Le Beau , co-author of the Protection Review, to get a preview of the topics dominating the second annual edition
Last year saw the launch of the Protection Review – an in-depth analysis of the past year in the protection market. One half of the team behind the Protection Review is ex-underwriter come marketing and consultancy guru Peter Le Beau. Underwriting and marketing may not be two skills you would immediately put together, but Le Beau has no regrets about moving from his role as head of life underwriting at Swiss Re UK to become its head of marketing and PR.
In fact, Le Beau's interest in protection marketing inspired him to set up his own consultancy, Le Beau Visage, which focuses on firms working within the sector.
"I aimed to help companies differentiate themselves in a commodotised market – and I think I've done that," he explains.
"But I've also taken up crusades on behalf of the four companies I'm non-executive director of. It may sound trite but I happen to believe that it's very important to sell protection to as many people as possible. That's what I'm trying to do."
From Le Beau's unusual career moves he has gained exceptional experience behind the scenes of the protection market. It was therefore a natural move for him to become involved in the Protection Review, which sets out to encompass both technical and strategic issues.
The Protection Review aims to act as an annual analysis of where the market is heading, looking at the big issues – such as regulation and customer services. It also analyses various product markets, making comparisons with overseas markets and then uses the views gathered from an annual roundtable discussion, involving five or six intermediaries and a handful of reinsurers, to get a wider perspective on the issues hitting the market.
Credibility
Being in only its second year, Le Beau believes it will take two or three more years to get an industry momentum behind it, but he is confident it will gain more credibility with each issue. "It achieved 60-70% in its first year of what we wanted to do, but we're striving to do better," he says.
One of the key issues discussed in this year's edition, which will be published in mid-July, is the growing concern over customer service, particularly the slowness in underwriting procedures.
"There has to be a more intelligent way to select than we are currently doing now," says Le Beau. "We've got several people reporting that it's taking several weeks to process straightforward cases. Years before the technology was available to improve the situation, it wouldn't have taken nearly as long."
However, not all life offices are the same. According to Le Beau, the fact that some providers are managing to improve standards only highlights the need for the rest of the market to get into shape.
"You're seeing some offices – Legal & General and Friends Provident are good examples – that are really making a breakthrough in improving services. The whole issue of automated underwriting is key," he says.
When reviewing the last year in the protection market it is impossible to overlook the ongoing issues with critical illness cover, despite little headway being made. And the Protection Review makes no exception.
"Will we ever see the new generation of critical illness products? A year on, we're still talking about it. The market hasn't moved in the way people were expecting it to. Some of the prime movers in the market have set the pace against changes because they genuinely believe the guaranteed product is a valuable product," says Le Beau.
Income protection is also highlighted. According to Le Beau, everyone now wants to know not how, but if it will ever sell.
"Income protection is something that people don't buy into – you would think that with mortgages being regulated, it would be a natural sale alongside a mortgage, but I don't think that people believe in it as a product anymore."
There are also questions over life protection. "Will it be term or will we see some variants? And what's happened to the whole of life policy?" he asks.
Turbulence
Le Beau says the turbulence seen over the last year in the long term care (LTC) market is also bringing important issues to the fore. With AXA, Norwich Union and BUPA all exiting the pre-funded market, major inadequacies in this key area of protection have been exposed.
"How can a product that is so needed, and that demographically is so important, not have taken off? " he asks."The pre-funded market has almost ceased to exist, yet we're going through a situation where most people only have their house that they can use to fund care."
Le Beau is quick to shift any blame for the failing pre-funded market from intermediaries working in the sector. The challenge is for providers to come up with a workable solution for advisers.
"Some of the very best intermediaries work in the long term care market. It goes beyond a mere job with them. It's not about shoving granny in a home," he says.
Le Beau is also uneasy over the Financial Services Authority's decision to regulate LTC products as investments. "I'm a bit concerned it may discourage people from selling it," he says. "You get the impression that the industry has given up on it and that relates to the fact that the Government seems to have dropped it from the agenda. I don't see how it can drop an issue that is demographically so important."
The other issue that stands out strongly in this year's Protection Review is the wave of change being seen in the reinsurance market. Le Beau says that moves in the way reinsurers are operating could influence the way the direct market behaves and the amount of capacity it has to write business.
"It is a very big change from the days when reinsurers focussed on adding value, developing products and thinking up new ideas by keeping abreast of what the wider challenges are. Now it's much more focussed on product issues and making sure the relationship is properly drawn, that companies are underwritten properly and do not expose the reinsurer to unnecessary risk – it's more prescriptive," he explains.
Le Beau also speculates that a bi-product of this change could be for a cyclical effect to emerge in the life market.
"This is where there is a lot of capacity when rates are good and when rates start to worsen people drop out of the market and so forth. I hope this doesn't happen as it could destabilise the protection market," he warns.
This year's Protection Review is not a particularly optimistic report – Le Beau is the first to admit that almost every product appears to have its problems. But it should make for an interesting read.
