iPipeline Quarterly Autumn 2024 Edition

Welcome to the latest edition of iPipeline Quarterly. We’re leaving Summer well and truly behind as Autumn has appeared quite literally overnight!

As we approach the final quarter of the year and work both independently and collaboratively as an industry towards our goals, autumn is a time to reflect on the challenges we’ve encountered so far and the goals we have yet to achieve – year-end is approaching for many.

However, we can’t put the organisational blinkers on. We need to be mindful of the role all of us play for the greater good. For our market, that means adding value to consumers lives by making them more secure financially, helping them protect themselves and their families.

Value is a very current theme, with the FCA recently announcing its forthcoming market study in protection and providing fair value – does the market offer consumers the value it should?

We debate value a lot in our industry such as the price vs value argument. But no debate is binary, and no debate should be stuck in time. Here, for example, we’ve seen a shift. Customers are no longer signing up to the cheapest policy as adviser judgement and recommendation influences their decision through a number of factors; product features, value added benefits, premium costs.

You’ll read more on this topic throughout this edition including the importance of data when it comes to companies proving their actions – the age of data driven regulation is here to stay.

Speaking of data, our annual customer survey is currently underway and is an incredibly important piece of work for us as we gain valuable insights to help us improve what we do so that we can help you. This year’s survey goes beyond your thoughts on us. We want to find out much more about the advice market we serve. To understand you better, means we can serve you better. We will summarise the results in our next edition to demonstrate how we are adding value to your world.

Finally, I’m very much looking forward to attending some of the industry’s key events as we enter conference and awards season. We have the chance to reward and celebrate the efforts of our colleagues and peers. I’m very proud to announce that once again, iPipeline are finalists at this year’s COVER Excellence Awards in the ‘Insurtech of the Year’ and ‘Outstanding New Technology Offering’ categories, the latter for our enhanced PreQuo Lead Gen tool. I wish all finalists good luck and look forward to seeing you there!

By nature, I’m future focused. It pays to be in technology. If you’re looking backwards, it’s likely you’re going backwards.

So, when I stopped future gazing for a moment and was forced to ponder how long ago it was that the FCA pulled the proverbial rug out from the previous regulatory framework and introduced the much discussed and much debated Consumer Duty, I was surprised to note it was a year – almost to the day.

All firms were required to comply with the principles that govern this game-changing piece of regulation by 31st July 2022. A point in time where we still had a Conservative Government (although I’ve lost track of which Prime Minister) and were still enjoying summery weather, well – kind of anyway.

So, it got me a thinking. The year since implementation of what will forever be known as just ‘The Duty’ (to me, only…) has seen much, profound change and the UK financial services market is no exception. But has this change been as a direct result of The Duty? Now seems like an ideal time to reflect on this question and make some predictions for the future.

Whilst it wasn’t like we didn’t know it was coming. There was the pre-implementation period, where firms, along with an army of consultants, translated what it meant and what steps they would need to take to comply and to thrive.

Then there was what I call a ‘proof planning’ phase. Firms had developed their strategy and how they intended to respond, but Consumer Duty was also a clear shift to evidence based, data proven regulation. Firms needed to build a framework of data and evidence to prove how they had delivered against their strategy.

Finally, and perhaps most importantly, it is about embedding a true customer focused culture throughout all firms. I’ve been around the industry long enough

to know that the vast majority of the market works in the best interests of their customers – some of them just need to ‘show their working out’ to quote my old maths teacher. All firms for example, now need to be able to prove that they offer fair value to their customers throughout their relationship.

So, with these key outcomes in mind – I reflect, has there been a discernible change which indicates that the required shift has taken place in the past year?

I think so, yes. There are a number of indicators which indicate that firms across the spectrum are embracing both the duty in practice and in spirit. Here’s a few examples.

First, we’ve seen a big increase in demand from both distributors and providers for data that help them prove their Consumer Duty strategy is working to plan. The types of data they’ve requested has varied (more on that below) but the intention is clear.

We’ve also seen changes to the type of data requested. The core of our data business has always been supplying the most comprehensive pricing data to help providers deliver and manage their protection pricing strategies

– this hasn’t wavered, but we have seen demand grow into other areas of insight. Providers are clearly trying to understand in greater depth where and how their products are performing. They are more focused on closely monitoring effective product targeting and segmentation.

In terms of said adviser behaviour, we have noticed a trend develop and continue of advisers who are less likely to recommend simply the cheapest cover. Yes, price still remains the key factor driving the majority of recommendations, but we watch with interest the move towards assessing quality and value too. Of course, the cheapest premium and the best value often go hand in hand.

Can we pin all these changes solely on The Duty, no. But has it had an impact on market thinking, behaviour and therefore consumer outcomes, yes. I’m sure it will continue to do so.

As a final thought, it is interesting to note how the duty has changed the adviser mix recommending protection. This is an area we have a keen interest in, we’ve been monitoring portal traffic to better understand where protection advice comes from and where growth in the market can be stimulated. Is it through mortgage advice, protection specialists or generalist financial planners?

But sadly, that’s another story for another article. I’ve got my own duty to maintain – a duty to the wordcount.

It’s been over a year since Consumer Duty came into force and the regulatory focus on protection continues with the FCA publishing its thematic review and planned market studies. Reflecting on Consumer Duty’s cross-cutting rules for supporting good client outcomes, we’ve put together three tips for crafting the ultimate protection strategy.

1. Memorable advice drives positive outcomes

Research from The Association of Mortgage Intermediaries in 2023 found that, although 99% of advisers are raising the subject of protection, only 50% of clients can actually recall having the conversation¹.

When asked why, customer feedback suggested that putting protection into context with more personal stories and real-life examples would make these conversations more memorable. The key takeaway? If firms offer advice that leaves a lasting impression, customers are more likely to act on the advice they’ve been given and drive positive outcomes.

Advisers should carefully consider their language, when the subject is raised and how much attention is given to ensuring clients clearly understand the benefits.

If you need help with memorable stories to playback to your clients, see our latest case studies.

2. Holistic protection that should consider all risks

It’s foreseeable that many clients will suffer some form of disruption to their working life before retirement. For example, one in two people will experience cancer in their lifetime.² But, without seeing the future, it’s impossible to know which protection policy they might need.

Take a 35-year-old female non-smoker. Before retirement at 67, she’ll have a 4.1% chance of dying and a 13.5% chance of serious illness. This may sound relatively low, but current statistics suggest that she’ll still have a 46.3% chance of requiring at least one month off in her working life, due to injury or illness.³

Any of the above risks could have a devastating impact on the individual and her family. Advisers should seek to understand each customer’s existing arrangements and budget to craft a holistic solution that provides the most-valuable protection for whatever happens.

3. Income underpins financial objectives

Naturally, many clients will approach advisers with a clear focus on their long-term financial objectives or mortgage. But it’s important to help clients understand how protecting income can underpin many areas of financial planning. Without reliable income, their mortgage can’t be paid, and their retirement savings or investment contributions might have to stop. They may even have to sell their home, break into savings or retire early.

In this way, Critical Illness Cover is more than just about preserving clients’ current lifestyle or immediate financial stability. It’s also about giving them the best chance of hitting their goals.

Find out about our recent critical illness changes.

A final thought

Consumer Duty is arguably one the biggest regulatory changes we’ve seen from the FCA in recent years. As advisers, we should be focusing on having engaging and passionate protection conversations that go further than just explaining what products do. Solid, tailored advice must highlight any gaps in a client’s existing arrangements, make them aware of their individual risks and prioritise their long-term financial objectives. This way, we can always put each customer’s needs first.

For more insights, watch our on-demand webinars.

Source

¹ AMI Viewpoint – The Perception Gap

² Cancer – NHS

³ L&G risk reality calculator

Protection Market 2023 – State of the Nation

In the June edition of iPipeline Quarterly, we spoke to Paul and Ron in the first of our mini-conversation series centred around the latest Swiss Re Term & Health watch report.

In this edition, we’re continuing the conversation beginning with market consolidation, opportunities and niche markets.

–

Paul, we saw big name brands and major players exit the market during 2023. What impact did this have?

It’s an interesting point. We lost both Aegon and Canada Life in 2023 and AIG has now been acquired. The volumes from Aegon and Canada Life were quite small – a key factor in their closure. However, what they did in their niche areas was extremely good. AIG is quite a different matter – delivering large volumes of products across many channels and segments. The UK is still a highly competitive market though, with price per mille still coming down in general. The market fluctuates in size, growing and shrinking and yet there are opportunities for entrants – and we are expecting more providers to enter the intermediated market and to cover more product lines. There are also significant opportunities not being served adequately, areas like renters – we need to focus on growing out of our constrained market.

Ron, do you think there’s going to be more consolidation? What’s your view and what do you think the impact of that’s going to be?

I think there may be some acquisition of closed funds. I can see more consolidation happening and then there’s a big question around what makes a healthy market for customers.

I think if the demand and opportunities are there, organisations and smart people will fill them and we’ve seen this across long-term individual business and across group business as well. I think the market will consolidate, partly driven by just the cost of being in business.

The niches will be there, but will they become clever distribution niches needing a life insurer with a licence? That remains to be seen. I think the market is not in a bad way despite some contraction in new sales. I also think it’s natural that firms will decide that they’re going to employ their capital somewhere else from time to time.

The question around opportunities and whether we target the challenging intermediated prime market or a market no one’s serving, niches such as renters for example, is interesting, Ron?

There are some good niches, for example business protection which has been woefully undersold. We (Swiss Re) are looking at how we can raise awareness as it’s a huge opportunity. I’m encouraged to see individuals in the industry who are providing specialist training in business protection.

Market data on the occupational side shows that the customer in 90% of schemes across each of the product lines is an SME. So there’s demand and interest in it, but just not enough. There’s a huge opportunity for workplace disability arrangements with all the value-added benefits they include for both the employer and the workforce.   

Paul, what is your experience of this?

I think we should consider how to signpost SME group protection better on protection sourcing systems. Perhaps have a page or two just about SME schemes, who provides them, how they work, regulation, how to get an agency where required etc. We should have one place that everyone can go to so we can understand who’s playing in that market and how easy it is to source and write this type of business. It is all about bringing it to the front of mind, so when an adviser is in front of someone who runs an SME, they can ask, ‘have you considered a protection scheme for your employees?’ We could add in sales and marketing support, there are many great marketing and support items in the market.

A speaker at Protection Review commented that our protection is the cheapest in the world. However, it isn’t just about price, Ron?

I think what customers expect from us is value and I genuinely believe that price and value are closely linked but it’s not just a case of taking the cheapest products. Anyone can go and buy products online, but advisers need to be making the point that the value they’re adding is actually the advice. Take policy ownership as an example. A customer wouldn’t normally realise that a policy should be put in trust or in a nomination so part of the value of advice here is that these aspects are handled properly and that intended beneficiaries get their money faster.

What’s your view on the value of advice Paul?

Even with all of today’s technology we are not getting all the right messages to the right people in the market. Demand for protection is not rigid and this makes the process of tapping into peoples’ needs and ensuring they take out the right products for their needs very difficult. Advice and empathy are invaluable in our market. Not just when helping clients understand their needs and then take action to take out the right policy (and trusts) for their needs, but on an ongoing basis to review and update their financial resilience. And as value added services grow, so does the need to help remind clients of the options they have.

So are annual statements the way to go in your opinion Ron?

I used to be quite ambivalent about annual statements but now I think they’re absolutely the right thing to do – not just because it’s another piece of paper, email or whatever it might be, but because it reinforces the value of what the customer has, supports regular contact with customers and makes them more aware of what they have, haven’t got or should do.

What are your thoughts on this Paul?

Our Life Update form provides the technology that makes these tasks simple. A simple tick box exercise establishes if anything has changed and if the product is still appropriate. Some firms use this rigorously, but not everyone. Really, everyone should use a review process as it helps remind people that they’ve got cover! People need constant reminders. Maybe we should add in the value-added benefits that came with the policy and ask if they’re aware of them and used them?

So this leads onto the questions and challenges of how we’re going to evolve and product design and market scoring. Ron, take us through this.

There’s a discussion around designing products to get better ratings on comparison and analysis sites. Whatever scoring system is used has to be relevant and weighted to the most important factors. Service comes into this as well and that’s not so easy, but I do think service really matters on things like this.

Paul, how does this stack up with your own service?

The number of times people choose the cheapest product on our service has gone down. They no longer just buy the cheapest, but review quality measures – which is driving higher quality. We can see that the number of people selecting essential / budget products is reducing as advisers take them through the cost value decision process.

It’s still quite hard for people to weigh up the balance of price and other quality factors. This goes back to the value of advice and explaining to a client in a suitable way to get them to understand and then select the most appropriate solution for their circumstances.

Finally, Ron, what are your thoughts on the topic?

Yes, it’s very easy to just revert to the cheapest. We are encouraged that we’ve seen some very good growth on the individual income protection side on the number of new policies that go through to retirement age. As an industry, we moved over quite quickly to the majority of new sales being two-year benefit periods. That’s OK as long as it’s clearly explained but a two-year benefit could pose issues for those suffering from long term sickness or disability.

The group risk market has shifted over a period of time to providing typically five years maximum cover and possibly a lump sum at the end so there’s been a general shift across both individual and group markets towards shorter benefit periods.

Income Protection Awareness Week (IPAW), the income protection themed event from the Income Protection Task Force (IPTF), is back for 2024 and will hit the screens each day between 12 and 1pm in the week commencing 23rd September. Sessions are free to attend and each one qualifies for one hour of CPD with certificates being issued automatically for those attending the live sessions. Anyone interested in attending should register for each session that they want to attend here and follow IPTF on LinkedIn to keep up to date.

So what is IPAW? Previously known as Income Protection Awareness Week, this year the A has been reclaimed with the event now known as Income Protection Action Week.  The aim of IPAW has always been to inspire advisers to take action following the broadcasts and the new name cements that intention with viewers encouraged to share how they were inspired and what they will do differently #BecauseOfIPAW on social media.

The series of webinars are aimed at anyone with an interest in income protection and will cover a diverse range of topics including how critical illness and income protection can work together, adviser panels considering working with different types of clients, an examination of business protection, an evaluation of the adviser role in the claims process, annual client reviews and a consideration of value-added services.  New this year, coaching sessions each day will offer guidance on adviser mindset, avoiding common mistakes in the advice process, overcoming objections and managing trickier client conversations when their experience is not straightforward.

IPAW aims to inspire advisers by sharing best practice among peers and encouraging open discussion about the challenges and successes faced by those advising on income protection. In recent years we’ve seen a growth in sales which comes on the back of the pandemic, a cost-of-living crisis and of course Consumer Duty. Although this is good news for the market, it has never been more important to keep talking to clients about protecting their income and to ensure that advisers have the confidence and understanding to do this.

IPAW works best as part of a collaboration across the industry. Last year we saw unprecedented levels of engagement online and we hope to see a repeat of that this year. Additionally, it’s great to know that so many IPTF members will be holding events such as income protection themed webinars and educational events.

Despite rising sales of income protection over the past couple of years, it’s important we keep the momentum in the market and build the confidence of advisers to have effective conversations with their clients. There’s never been a better time to turn awareness into action.

#IPAW2024

Did you know that according to the Association of Mortgage Intermediaries (AMI), only one in two advisers regularly revisit their client’s protection needs?¹

With everything advisers need to do to protect clients and comply with Consumer Duty, revisiting existing client’s needs can sometimes fall lower down the priority list. But for those advisers who don’t have time to revisit protection conversations, they could be missing a great opportunity. Not just to ensure clients are adequately protected, but to demonstrate the value of the advice to clients.

Building trust

Trust is the foundation of any adviser-client relationship. Reengaging with existing clients is a great way to demonstrate a commitment to their long-term wellbeing and to continue to build trust. Whether clients take out protection or not, it’s key to keep educating clients on the need to ensure they understand what protection offers and can make an informed decision.

Afterall, advisers are in a unique position to act as an educator, guide and potentially, the first line of defence against life’s unforeseen events.

Supporting clients with changing needs

Life rarely stays the same. Family dynamics, employment status and health can change over time.  Regularly revisiting protection conversations ensures that advisers can adjust their clients’ protection plans to fit their current circumstances. Added to this, protection providers will often add enhancements to cover which clients may not be aware of, presenting an opportunity for advisers to help clients understand how these changes may impact them.

Pressure on client budgets

With the Bank of England estimating that around 5 million homeowners will see their mortgage payments rise between now and 2026², advising clients on how to remain protected while facing increased mortgage costs is even more important. And for those 1.5 million homeowners who have fixed rate deals ending in 2024³, ensuring protection is part of the mortgage conversation is paramount.

Supporting advisers

There are a range of resources available to help advisers in their protection conversations. At The Exeter, we have created a Revisiting Protection Conversations tool to help advisers re-approach the income protection conversation with existing clients. This could be a great starting point for those advisers who don’t currently revisit protection conversations.

Source:

1 Association of Mortgage Intermediaries

2 Bank of England Financial Stability Report December 2023

3 Homeowners alliance

Why not take a look?

The Exeter – Revisiting 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.