Industry advised to follow lead of wealth management sector
A leading financial expert has called for more effective regulation of the protection industry, as well as greater transparency.
Speaking at the annual protection review dinner in London, Paul Bradshaw, chairman of Nucleus Financial Group, said: "Some form of deeper product regulation is appropriate."
However, more regulation in product development remains controversial in the industry as many feel it stifles innovation.
Commenting on Bradshaw's speech, Peter Le Beau, managing director of Le Beau Visage, said: "More product regulation is not welcomed by many people as it puts a stop to real innovation and we need innovation in the industry."
Yet Bradshaw believes that both stronger regulation and innovation can coexist in a healthy industry. But he warned against superficial innovation.
"I worry that innovation in the life, critical illness and income protection markets can too often become a gimmick, not adding to real customer need and detracting from the evolution of adequate and therefore automated customer service," he said.
Bradshaw called for tighter regulation of the protection industry as a whole.
"It is a source of great sadness to me that the practical impact of regulation over the past 20 years has been to remove caveat emptor from the informed middle classes while leaving less advantaged sections of our community exposed to every debt and insurance rip off."
Bradshaw urged the industry to follow other key sectors in the financial world. He praised the wealth management industry for the changes it has made in making its sector more transparent and he urged the protection industry to follow its lead.
"Compared to the aggression shown to the life and pension industry, the introduction of regulation to protection and general insurance has been mild," concluded Bradshaw.
Commenting on Bradshaw's words and the state of the protection industry as a whole, Le Beau agreed the industry does need to change and in particular, to treat customers more fairly.
"Customers need better access to information about products," he said.
Bright Grey also called for better access to information as well as an end to the price war.
Andy Peters, distribution director for Bright Grey, said the industry should be trying to break out of the price war by focusing on value and advice instead.
However, the industry seems to be at an impasse in terms of the price war as few people can offer realistic means for prices to be cut.
Peters concluded: "Quite how this will be achieved is not clear, and it certainly looks unlikely to happen in the short term."
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