It’s good to talk… and we need an appropriate distribution framework that allows that to happen.
‘If life assurance was free, how much would you have?’
‘You don’t buy life assurance because you’re going to die, but because those you love are going to live’
‘If you had a money-making machine in the corner of your room, would you insure it?
These ideas featured in life insurance training courses I attended 40 years or so ago – maybe some still use them.
They’re a reflection of the adage that ‘life assurance is sold and not bought’.
Since then, we’ve seen a very material switch in the way general insurance is bought, but the same cannot be said for life insurance.
General insurance is increasingly bought direct – latest Association of British Insurers figures suggest 51 per cent of personal lines business was direct and within that 63 per cent of motor business. And that proportion would be inflated when all the comparison sites are included.
For years people have suggested life assurance will go the same way, and yet, as the Financial Conduct Authority's new terms of reference for a market study into the distribution of pure protection products makes clear, protection remains stubbornly intermediated.
The main distribution channel for pure protection products is via intermediaries, it said. In 2023, around 92 per cent of income protection and 82 per cent of critical illness premiums from new sales were generated through intermediaries.
Why the difference?
The law says we have to insure our car, we regularly see the impact of huge vets’ bills, lenders encourage us to insure our house, but few like to think about the impact of death or long-term disability.
One of the most obvious changes in the protection market in the past 40 years is the actual number of advisers involved.
In the 1980s, adviser numbers were measured in the hundreds of thousands – insurers and banks all had large sales forces, most of which have now disappeared.
Now adviser numbers are in the small tens of thousands, and those talking regularly about protection will be nearer five thousand.
We’ve seen the rise of the specialist firms who focus solely on protection and it is to their credit that sales have not fallen over the years in proportion to the decline in adviser numbers.
There’s a big opportunity for those that are left, and for those advisers who may focus on other areas such as wealth or mortgages, it has never been easier to signpost customers to specialist protection advice.
Trusted relationships
The direct sales forces have gone, so too the idea of ‘home service’, where advisers walking up the garden path to collect the premiums were seen as family friends and were often invited to the weddings and funerals of clients they had served for many years.
