Alan Lakey, director, CIExpert, discusses the findings of the Critical Thinking 24 research, which shows advisers have a long way to go to educate consumers.
That perennial chestnut, ‘the protection gap' rears its head every so often and as usual we sermonise about how we must put matters right, how sad it is and so forth. However, how many of these resolutions are predicated on opinion as opposed to actual research?
The recently released ‘Critical Thinking 24' report from CIExpert reported the responses of 5,000 consumers who were questioned by Opinium at the end of 2023. Many of the answers surprised, even dumbfounded, many of us.
One of the least surprising was that consumers were far more likely to look online for a critical illness policy than to approach an adviser. This is now the norm for car, house and pet insurance and the online search is now firmly embedded in consumer's minds as the default approach. Industry insiders are aware that online buying leaves the purchaser without advice, without any means of product comparison and without the protection of the ombudsman.
When asked why they would not approach an adviser the two main reason were "I don't want to be pressured into buying something" and "I couldn't afford an adviser". The old fear that advisers are glorified salespeople continues to pervade consumer thinking. Equally, the fact that other financial products such as investments and pensions no longer operate on a commission basis appears to have persuaded most consumers that this similarly applies to protection plans. Other responses were "I don't trust them" and "I don't think they add any value'.
Advisers and insurers assume that the fee/commission differences between protection and investments is known to consumers but evidently this is not the case. Allied to a high level of distrust these misapprehensions are a major factor in reducing the numbers of protection conversations. Whilst it may appear unnecessary this needs to be pointed out to consumers - at the start of any conversation - that protection conversations and/or advice does not involve payment of a fee.
When asked whether advisers charged for advice on critical illness plans 49% admitted they didn't know, with over 62% of the remainder believing advisers did charge a fee. Over 71% of those with an opinion attested that they believed advisers have access to better quality products than available online.
The matter of consumer distrust has been around for years and surely is a remnant of the door-to-door selling practices on the 1990s. Perceptions are hard to shift and any change from this mindset will be likely be gradual.
On a similar note, consumers were asked what would motivate them to take advice. The largest response was "if advice was free" with another being "if advice was cheaper". Another interesting reply stated, "if I could be sure that taking out a policy via an adviser would cost the same as it would online". Aggregators are often able to undercut advisers because they do not give advice, do not arrange trusts, negotiate higher commissions based on volume and do not provide buyers with the protection of the Ombudsman. Of course, consumers don't know this either.
Again, a fixation with price - typical of online insurance-buying habits - diverts from the value concept espoused within the Consumer Duty edicts.
What can we learn from all this? What marketing initiatives can we glean from this research? Firstly, we need to embrace simplicity, particularly in the language we use. Product brochures are poorly designed and need reconfiguring to discourage consumers from consigning them to the bin or some understairs cupboard. Advisers need to make clear that they do not charge for discussing or arranging protection plans. Often, the plans offered by aggregator sites are inferior to those available via advisers. We assume consumers understand this stuff, but evidently, they don't.
It is time for a marketing upheaval - from both insurers and advisers. It is manifest that all consumers need the quality products that have been made available, yet our promotions are poor and fall at the first hurdle when trying to motivate consumer action. It is time for a major review.
