COVER editor Adam Saville takes an in-depth look at the recent access to insurance signposting agreement. How is it being done and where is it needed most?
When the protection industry voluntarily signed a landmark agreement to increase access to insurance for people with pre-existing medical conditions and disabilities in January of this year, it solidified an agenda that the sector had been striving towards for some time.
A reduction in the availability of regulated protection advice following the Retail Distribution Review (RDR) in 2012 and Mortgage Market Review in 2014, combined with an increased prevalence of non-advised sales and a rise in online direct-to-consumer (D2C) insurance distribution has created a perfect storm, which has potentially put consumers with pre-existing medical conditions at risk of missing out on protection options. Or worse, left feeling as if they were uninsurable, despite the availability of specialist protection advisers with the skills to match clients with an emergence of life insurance offerings specifically being designed for those traditionally classed as "non-standard".
In light of the Financial Conduct Authority's (FCA) crackdown on the lack of access to insurance to travel insurance, the initiative signposts customers unable to find suitable protection solutions using BIBA's Find Insurance Service, which helps direct them to specialist brokers who can assist them further.
You only need to take a look at some of the bad publicity we've seen over the last couple of years to see why signposting is so important.
So far, 38 insurance firms, supporting bodies and intermediaries have signed the agreement, including large organisations such as Royal London, Lloyds Banking Group, Swiss Re and Zurich, as well as intermediaries like Cura, LifeSearch and Futureproof.
Just last month, D2C life insurance provider Neilson Financial Services, the firm behind the online Choozi comparison service, also added their name.
The agreement, launched by the British Insurance Brokers Association (BIBA) in partnership with Johnny Timpson's Access to Insurance Working Group committee, was even backed by Insurance Minister, John Glen MP, in the Houses of Parliament.
According to BIBA executive director Graeme Trudgill, the Find Insurance Service, which draws upon a call centre and its website, is the "ultimate insurance dating agency for customers".
"We have been able to identify through an evaluation process of hundreds of firms which firms are most suited to handling enquiries from which customers with a pre-existing medical condition or disability," he tells COVER. "BIBA helps with the triage service to introduce the customer to a specialist firm that can meet their needs - a win-win for everyone."
DWP disability and access champion for the insurance industry, Johnny Timpson, who leads the Access to Insurance Working Group, believes that regulatory requirements such as the Markets in Financial Instruments Directive (MiFID II), the Insurance Distribution Directive (IDD) and Senior Managers and Certification Regime (SMCR) have put greater onus on the need for firms to act in the best interest of clients, something he feels the signposting initiative addresses head on.
"Life offices, fintechs and aggregators selling D2C or via controlled/tied distribution agreements should re-engage with the 'hierarchy of protection advice need' and for those customer needs that they cannot serve."
He adds that firms be able to meet the protection needs of customers, or develop a contractual relationship with one or more protection specialist advisory firm if they can't. If that is not possible, they should signpost to the BIBA Find Insurance service or similar.
"It is rare that every firm can help place every risk for every customer, this is where signposting can help give the customer a better journey," adds Trudgill. "The more awareness of the agreement the more critical mass it will receive so we will always advocate signing the agreement, there is no cost to sign, it is voluntary and it helps demonstrate a firms positive intentions in assisting customers."
LifeSearch CEO Tom Baigrie has warmly welcomed the introduction of a "reliable" referral system, which, he says, fills a gap for those unwilling to form commercial partnerships to help service the needs of customers. However, he still feels not enough in the marketplace are engaging with the new system.
"Too many customers with complex situations - because of medical history or because they own their own business - and in need of advice are fobbed off because the person they are seeking it from doesn't know the answers," says Baigrie. "It's time everyone in financial and legal services realised that they can help any customer get protected if they learn where to send them to for advice. That's what we call signposting. It allows the good you can do your customer, which we can all do, to be many times magnified with no effort or cost at all."
Chair of the Protection Distribution Group (PDG) and managing director of specialist advice firm Cura Financial Services, Alan Knowles, feels that signposting could also help mitigate and prevent negative stories in the press about life insurance and, as a result, improve industry trust.
"You only need to take a look at some of the bad publicity we've seen over the last couple of years to see why signposting is so important," he says. "We saw major consumer newspapers talk about people being declined due to things like being overweight or having a mental health condition. The interesting thing about all these cases is they were seemingly all avoidable; all of them would likely have got cover had they have been signposted, rather just being told they couldn't have the cover."
While acknowledging that there may be trust issues preventing some intermediaries from forming partnerships, Knowles believes there are two key areas where signposting or a referral agreement is most needed. Firstly, for any firms, such as wealth managers or mortgage brokers, not currently offering protection advice. Secondly, for protection advisers and insurers unable to find suitable solutions for customers due to health disclosure. Specialist intermediary firms, such as Cura, Moneysworth and Insurance Surgery, have been set up especially for this sort of business.
"There are firms who specialise in providing such cover," he says. "Some intermediaries have access to products not widely available and often can get decisions/cover for clients that more mainstream firms can't. And, if they can't do the cover themselves then they might be able to signpost to someone else that can!"
While there is clearly a need for signposting in all areas of protection distribution, we have spotlighted the main focus points for the industry below.
Legal & General has estimated that the business protection gap is around £1.3trn, while the Swiss Re Term & Health Watch 2020 highlighted that one of the underlying barriers sits with distribution.
"Product providers operating in this market produce high quality material to support intermediaries in identifying and quantifying the need yet the number of new policies is only around 20,000 year on year," Swiss Re technical manager Ron Wheatcroft tells COVER.
However he explains that business protection brings different challenges to writing personal cover, so therefore fully advocates the introduction of signposting for key person insurance and other forms of business protection, especially through wealth managers and others who many not be experts in this field. "It is an area where a skilled adviser, equipped to understand and deliver solutions for businesses, is essential.
"I'd love to see more advisers make use of the material available from providers and acquire those skills themselves but this won't be for everyone. That's understandable."
Such practices would not only benefit businesses, there is great market potential too. According to L&G research, just 18% of SMEs have key person cover in place, despite 99% saying that they had lost at least one key person in their business that needed to be protected.
"A model based on Find Insurance could be a way for wealth managers and others not expert in advising on and arranging insurance protection to work with specialists to deliver the broader service," says Wheatcroft. "With greater professionalism expected of our industry, it can't be right that, when a possible need is identified, it is just ignored."
Householders and private renters
Around 53% of dual income, joint mortgaged households are at risk of being unable to benefit from the reformed welfare safety-net, now known as the Support for Mortgage Interest Loan Scheme, says Johnny Timpson. Since the Universal Credit revamp, neither party has to be earning in order to access it.
Renters are also particularly exposed. "Especially where those renting from a private landlord where the level of rent being paid is greater than the support available from the Local Housing Allowance welfare safety net in their postcode area," adds Timpson.
According to research by Hymans Robertson earlier this year, only 18% of UK renters believed they had some form of income protection in place. And a survey by Sainsbury's Bank indicated that only 26% of renters are likely to have life insurance or critical illness insurance, compared to almost half of homeowners.
Individual and family cover
Around 33% of the working age population in the UK has at least one long term health condition and 18% has a disability, according to Public Health England (PHE), while one in four live with a mental health condition at any given moment. With an aging population, these figures are expected to rise.
Meanwhile, consumer debt levels are returning to 2008 levels, with much of this debt being carried into later life, while a private sector shift towards money purchase pensions has eroded ill-health and early retirement safety nets, all against a backdrop of welfare state reform in recent years. Despite this, the UK population remains largely unprotected.
According to Johnny Timpson, there is a growing number of families in cohabitating relationships and cohabitees are still unable to access working age bereavement benefits. "For those who are eligible, there has been a reduction in the benefit support period from a potential 23 years to 18 months"
Self-employed and gig economy
The contracting, self-employed and zero hour contract population has exploded in recent years. According to the Office for National Statistics, there are five million self-employed people in the UK and many of these are far less eligible for occupational death in service benefits made available to many employed people.
This issue was highlighted by the recent £60k death in service benefit brought in by the NHS and local government in light of the Covid-19 pandemic.
Despite positive income protection market growth in recent times, illustrated by the Swiss Re Health & Term Watch 2020 which showed 20.9% market increase year on year, the product is still hugely undersold in the UK. According to Mintel, less one in 10 have something in place to ensure their income is secure.
Given the advice needed to place an income protection policy, signposting is being cited as a way to lead customers towards the many options available to customers, especially seeing as solutions can be tailored to renters, occupational classes and the self-employed.
Adding to this, official stats show that 14% of UK employees lack sick pay provision and 26% only receive statutory sick pay minimum of £95.85 a week.
While group risk providers offering employer-led life assurance, income protection and critical illness tend to be inclusive, in so far as employees can get access to generous levels cover without the need for medical evidence, there are still instances where cover is rated, postponed or declined following the underwriting process. "This is why signposting is relevant - for the group risk market just as much as it is for the consumer protection market," says Katharine Moxham, spokesperson for Group Risk Development (GRiD).
This would involve explaining the underwriting decision using appropriate language, being transparent, treating people fairly, with empathy and respect and letting them know about potential alternative options open to them. "It's important that people are aware that just because one provider can't offer cover, it doesn't mean cover isn't available to them," she adds.
"It's also important that we understand and take into account the possibility that an employee going through the group risk underwriting process may be (or may potentially be) a vulnerable customer, and so will need extra support."
GRiD is undertaking a piece of work to consider how the group risk industry can best support signposting (the complication here being that often, there is no direct contact with the employee for either the provider or the adviser).
"However, the agreement is non-prescriptive and in principle," says Moxham. "It's therefore up to each signatory to determine how best to put it into practice, given their own protocols, so there's no reason for group risk firms not to give the signposting agreement their own consideration in advance of GRiD's deliberations."
According to GRiD, BIBA's Find Insurance signposting service had received 120 group risk enquires at the time of writing.