Distribution challenges threaten to derail the protection sector from capitalising on "a golden opportunity" to sell, according to Defaqto.
The financial markets analyst's report Opportunity Knocks: Life and Protection Report 2010, says improved distribution is key in this sector to take full advantage of the market, but upheaval threatens to undermine the opportunity.
The report notes the UK is leaving recession behind and low interest rates mean the employed have disposable income.
Ben Heffer, an analyst at Defaqto, and author of the report, believes "Opportunity knocks" for the protection sector. However, he adds: "Intermediary distribution of protection products is low and once the Retail Distribution Review (RDR) comes into effect, we predict further shrinkage."
Worryingly he concludes: "In our research, we found even in the IFA sector that product recommendations did not match the needs of clients but were influenced by other drivers."
Providers are not immune from criticism either; Heffer reports the sector has also seen some shrinkage and has its own set of challenges ahead. "Some providers are considering direct-to-consumer propositions but they face insufficient consumer awareness to see early successes," says Heffer.
Other factors are continuing consumer lack of awareness and few industry efforts to deal with this, plus the negative effect of the ongoing PPI mis-selling denting consumer confidence in protection products.
The report concludes that, although the change of government presents the protection sector with an opportunity to enter into engagement with the State; "the industry needs to get organised and start defining market offerings more clearly in terms of products and delivery processes."
