One year on from the implementation of the consumer duty, and as we mark the 10th anniversary of the launch of the Seven Families campaign, it has been greatly pleasing to see protection advisers focus on hierarchy of need, and in particular, prioritising the protection of income.
As Swiss Re’s recent Term & Health Watch and Group Watch reports highlight, we are seeing a continued improvement in both individual income protection sales and occupation group income protection scheme membership.
Equally pleasing is seeing wealth and mortgage advisers, together with general insurance brokers, increasingly considering protection needs as part of their wider holistic planning conversations and actively collaborating with protection advisers to ensure that client needs are addressed.
Failure to have financial protection conversations all too frequently results in risks not being appropriately addressed, and consequently reduced client resilience to shocks together with poorer outcomes.
Consumer duty was heralded as a step change in regulation, which would raise the bar in terms of financial services market conduct together with improving consumer understanding, value, service and support.
In terms of delivering on the consumer duty’s value and support outcomes, I welcome the shift from focus on price to quality of the product.
This has been supported by the increased use of platforms such as CI Expert and Protection Guru by advisers to fine tune and tailor their recommendations, plus to ensure and evidence that the product features and support services being recommended address the client needs that have been identified and prioritised.
Welcome too, with issues such as economic abuse and clients increasingly living in cohabiting relationships, is the fact greater priority is being given to writing plans on a single life basis together with the use of trusts and beneficiary nomination (where and when appropriate).
Better understanding
With significant focus being placed on the consumer duty’s value outcome, it is important that the industry is equally mindful of the duty’s "understanding throughout the lifetime of the policy" requirement.
Intermediaries cannot rely on clients having knowledge of differing providers' types of cover, terminology, processes, definitions, and support services options.
Why would they, given the UK's poor financial capability compounded by the Money and Pensions Service's deprioritising of support for consumers to make informed insurance decisions.
With a duty requirement to evidence that clients understand what they are being asked, not only do intermediaries need to ensure clients understand the scope of the cover that they are buying, and the options available to them, evidence must be on file to show how the information was provided.
I’m personally delighted, and having long campaigned for it, to see that in response to the duty’s understanding requirement, we are now seeing firms viewing client communication throughout the duration of the period of cover as a priority, with the provision of annual benefit statements increasingly now the industry norm.
Annual benefit statements are also key to ensuring that both claimants and vulnerable customers are aware of the support available to them and hence for me, annual benefit statements are equally a requirement of closed, as well as open, policy books.
