With the rise in popularity of price comparison websites, Jon Finley explains how a fully functional website will provide advisers with the edge that they need to both retain and attract customers
Less than a decade ago, the idea that general insurance would become one of the most compared, quoted and purchased online products may have seemed a little far-fetched. Likewise, the very idea of selling direct via the internet was, for most regulated IFAs, only a faint threat several years ago. More recently, however, the number of general insurance and 'non-advised' life insurance products being sold online has grown significantly.
During the heady dot-com boom of the late 90s, many welcomed the arrival of internet-based services that allowed consumers to compare product prices and features. However, when insurance brokers and advisers realised their hold over internet-savvy clients was under threat, the realities of non-advised or 'execution only' sales suddenly started to come to the fore.
More recently, the Financial Services Authority (FSA) fined several payment protection insurance providers for mis-selling insurance, in addition to not having adequate systems and controls in place. This move has left many questioning what effect this will have on the future selling and advising of loan and income protection products.
Furthermore, if the Retail Distribution Review introduces a new regulatory status for the growing army of 'virtual' advisers, where does this leave 'real' advisers? What is the best course of action for firms that wish to continue selling mortgage-related insurance business and general insurance?
Although some would argue the problems of virtual advisers originated with technology, fortunately, the answer for real advisers may well lie with technology as well. The FSA has now decided that the sale of protection products on the internet - one of the fastest growing distribution channels of the UK's financial services market - should undergo a review.
Many IFAs have welcomed the move, but there may be consequences. It is all very well to ensure that advisory firms are adhering to tight principles and treating their customers fairly, but what about internet sites that provide a wealth of information and list premiums? These sites can carry tiny small print explaining in long disclaimers that, if taken out, the products advertised will be deemed as non-advised or introduced.
Consumer confusion
There is likely to be consumer confusion between the concept of non-advised and advised sales when products are bought online. This is because the non-advised route requires clients to make a selection based solely on the information provided, which must include comprehensive details of the policies on offer. Ideally this should be at the comparison stage, but it appears some product providers are waiting until the consumer has chosen a specific provider and product based on the limited information supplied. In this instance, no advice or recommendations are provided regarding the suitability of the product; the consumer is free to select whichever products provides the best value for money.
While the media tends to focus on general insurance policies currently dominating the web, including household and motor insurance, the volume of mortgage protection and term products that can be found online is just as significant. Parallels can still be found in the way that different types of insurance is sold online, however.
On 22 January, an article on the BBC's website, 'Price comparison sites face probe', looked into a report that focuses on the sale of general insurance policies online. Interestingly, of the three websites quoted in the article, only one appeared to have an insurer-generated key features document available, and where this was not available, only a reasonable description of the cover was provided. One described the cover to a satisfactory extent, while the other provided little more than high-level information.
In the report, the British Insurance Brokers' Association is quoted as being the driving force behind the FSA's review into the situation. While it is reassuring to see an association fighting to shore-up its members' interests, this market has also revealed a distinct lack of consumer interest in the concept of a qualified adviser looking into policies and premiums on their behalf. Increasingly more people are expecting this information to be readily available at the click of a button, 24 hours a day, seven days a week.
The AA's most recent advertising campaign demonstrates this point particularly well - Wherever you are, whatever you are doing, its team is working to find you the best deal. In reality, it is promoting its website quote service or its call centre, which is simply the same thing as a price comparison offering but with someone typing in the data on behalf of the customer.
In addition, the majority of these sites provide life assurance comparisons as well. However, the adage of life cover being sold, not bought, may still ring true, but for how long, as people start to trust these virtual internet advisers?
Status change
Car insurance is compulsory under the Road Traffic Act, and building insurance can be compulsory if you have a mortgage. Contents insurance is not yet mandatory, but most sensible people protect their household items and possessions. So when will life assurance become compulsory, or be willingly bought by consumers without advice?
Some of the more forward-thinking adviser portals have provided intermediaries with the capability to compete in the online life assurance market for some time now. An online comparative quotation service can be added to an advisers' website, which also reflects their brand, is now readily available.
For firms that intend to continue to write profitable business in the life and general insurance sector, robust and simple-to-use technology is an absolute must. Competing alongside virtual advisers means grabbing the attention of clients via the use of internet search engines, and driving them to a fast and efficient website. While some individuals may prefer a phone call, or face-to-face assistance, many choose to buy their cover online.
Consequently, the secret for advisers is to play price comparison websites at their own game. The key starting point is marketing, and it does not need to be thousands of pounds spent on prime-time television commercials - even the most basic of marketing strategies can make a difference.
First, ensure clients are aware of the site. If possible, provide client valuations and servicing via the same site, and change the content of the site regularly to ensure clients return to the site. In addition, new business often comes from referrals, and the internet is usually the first point of call for many prospective clients.
Most insurers do not have application forms that can be completed electronically, making it vital for advisers to get involved in virtual processes. Simple contact details need to be captured and sent through to the sales team to follow-up, and there are many companies available that can provide an outsourced facility to do this. It may also be appropriate to set-up a subsidiary within a firm that only deals in non-advised sales.
Electronic application forms have been in existence for several years now, but there are still advances to be made if underwriting processes are to be delivered in a more sophisticated format. In addition, a fuller range of consumer-facing applications will appear as demand grows.
Today, product providers value intermediaries as their primary source of business. There is no reason why this position should change if firms develop their business practices to grow and diversify, keeping in-touch with consumers.
A company website is there to complement the existing business, not to replace it. However, it must have the capacity to compete effectively. Technology should be embraced, and the survivors will be those that are continually adapting to meet new demands. n
Jon Finley is business development manager at The Exchange
