Protection 2012 - Facing the future

Richard Verdin
20 January 2012

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Protection business in 2012 and 2013 will be affected by events this year and some fundamental changes to the way customers policies are priced into the next. Richard Verdin explains.

While the Olympics and Euro 2012 will act to suppress sales, the pressures building into 2013 could well act to increase sales opportunities during 2012, albeit at the expense of business that would otherwise have been written next year.

It is worth thinking about the very real implications for advisers’ marketing, sales, resourcing and cashflow planning. If these have not already been factored into your business plans, then maybe you should think again.

The removal of the I-E tax regime, the introduction of genderless pricing, and planning for the implications of the Retail Distribution Review (RDR) must all be baked into people’s plans. Here is one view of the impacts and implications for advisers:

THE EFFECTS OF RDR AND I-E

If there is one thing all the surveys and commentary agree on, it is that the need for additional qualifications and concerns about the move from commissions to fees will act as catalysts for some advisers to leave the industry.

The thing surveys and commentators disagree on is the number of advisers who will leave the industry. More recent views have matured to suggest there will be more than just one wave, as some businesses inevitably fold despite best efforts in an RDR world.

While it is unlikely that those leaving the industry will be those who successfully and regularly advise on protection, there will be a market adjustment as a result of the lost sales that those leaving the industry would otherwise have made.

The balancing item to the market volume – and there is no suggestion this will happen seamlessly – is that an increasing number of remaining advisers will offer holistic advice incorporating protection, as customers look to reduce advice fees through the commission their insurance purchases generate.

The implication of this for advisers is that if you are not one of the advisers looking to include protection advice, then you may well find customers turning to an adviser who will, simply because it is more efficient for them to do so. The other impact of RDR is the move by some to restricted advice.

We are already seeing the development of restricted protection panels with commensurate and sometimes non-commensurate demands for increased commissions as well as marketing and technology support.