Why the importance of data just keeps on growing within protection

They say game changing interventions by the regulator are like buses…Well, they don’t and I’m sure that there are many in the market who hope they won’t ever say that in future!

But as I muse on the value and importance of data ahead of our next Market Pulse, I see the FCA has just announced a forthcoming study into the protection market. A study which will take in everything from competition and commission to claims. From a previously ‘light touch’ approach to protection, there are heavy footprints from Stratford beginning to show all over the market. All this follows hot on the heels of Consumer Duty, which to many is anything but a distant memory.

So, there’s plenty for many in the market to think about. Plenty to keep them busy on top of searching for the elusive growth we all strive to achieve. But is this latest study a negative thing? I think not. I welcome the FCA showing its hand and displaying just how important protection is and to get it right. The protection part of our market strives to get the entire market to show this same focus and include protection planning as a foundation on which all financial planning is built upon, rather than an add on recommendation which is how some would see it.

That said, this study is likely to be a further challenge for many.

The forthcoming study will examine many different facets within protection and how the market is functioning. There is clearly going to be a focus on commission and remuneration, with a view being formed on whether current arrangements are fair across the board. There will also be a focus on value. Does protection offer consumers the value it should? Are there scenarios where potential benefit is outweighed by total premiums paid for example? These are big questions which will impact the market for years, even generations to come.

I’m not equipped to use this article to hypothesise the potential outcomes to the study, past stating a belief that the protection market in general provides a strong societal and social purpose, protecting people and families from shocks with a safety net that in more cases than not just simply isn’t available elsewhere.

I can use the column for a rallying call, that ours is a market which can still up its game on data. There is a developing and clear thread from the regulator, and one which is sure to continue. For all market stakeholders, whether distributors or manufacturers, it’s not enough to state that they make decisions, build and manage products and processes and structure their businesses in the best interest of consumers. They need to prove it. With data.

When I say this, I expect very few to be surprised. Data has long been the lifeblood of actuarial teams, but its reach and impact is beginning to grow massively. When I’m speaking to partners and prospects, I’m now almost as likely to be taking a Proposition or Distribution Director through one of our market leading dashboards as I am to be speaking to a Head of Pricing. That trend isn’t going to change any time in the near future.

So, how can data help with the likely forthcoming questions from the FCA?

Product performance

One of the key questions is likely to surround the performance of products relative to their stated target market. Internal and external data can help prove that products are doing the job they were designed to do. From attracting the right audience at quote, to delivering the right result at claim.

Distribution management

Providers can use data to understand the distribution landscape in greater depth. Where they now might understand where their volume comes, and might come from, they need to increase their understanding – joining pre- and post-sale datapoints.

Segmentation & insight

Providers are striving to become more scientific in their segmentation and understanding of adviser types and sectors. Clearly data has a big role to play here too. It can help build a picture of competitive position and success in specific segments, in context of the market. It can also help to identify adjacent targets, segments or firms close in profile and behaviours that can be used to fuel growth.