There is a growing trend of protection products/advice sold through an aggregator. Are we at risk of creating a two tier advice market, and if so what would this mean?
Alan Lakey, Highclere Financial Services
Aggregators don’t really give advice do they? There are lots of questions going round the industry as to what constitutes advice. If I tell you the interest rate on a mortgage is 4%, is that advice? Advice is something you act upon because of the information I’ve given you.
Life cover is where aggregators can beat specialist advisers simply by offering a cheaper premium. When it comes to pure life assurance it possibly will end up as commoditised as car and buildings insurance.
The danger is that thinking extends to critical illness and income protection. Consider how easy it would be for someone to take out a policy, [not understand] activities of daily work, believe he’s going to be covered when he’s ill and finds out because he can clamber up some stairs, they won’t pay him.
[The consumer] can’t say he’s been mis-advised because he didn’t get advice. He can’t call the Ombudsman because it’s out of their jurisdiction. So that consumer, through thinking he knows what he’s doing and wanting something cheap is doing himself a disservice. Instead of saying ‘I was silly’ he’ll probably distrust the industry, so it doesn’t work in our favour.
The discriminations between companies are made by advisers, and without advisers, we’ll be focussing on the cheapest, and that’s where we’ll end up with a spiral of downward price pressure which will create other problems. Companies who reduce their margins will try to get it back by being firmer on claims.
Phil Jeynes, PruProtect
In terms of the intermediary market, we’ve already got a situation where it is two tiers – those who give advice and those who don’t give advice. The bulk of business for protection is probably non-advised through aggregators or telesales more likely.
There’s probably more than several tiers already from full advice around holistic financial needs right down to a website to pick different life insurance products. From an insurer’s point of view, we need to make sure we’re supporting all of those equally. It’s not for us to tell our consumers where they want to purchase protection from.
The majority of advisers probably buy their leads online so they’re ultimately purchasing the same customers who went online in the first place.
What really good advisers do is differentiate themselves from what aggregators offer. What aggregators offer is listing the products and giving some information about the product. If you’re a good adviser or intermediary, advised or non-advised, you can try and tailor that to the person on the phone or sat in front of you, instead of a list of options that you’re giving.
The key point for me is we as an industry need to stop looking at aggregators as if they’re some kind of interloper. Every walk of life is moving more and more to online. We need to embrace that and start working with aggregators instead of railing against it and saying you have to sit in an office with [an adviser] because that’s not for everyone.
