Peter Maynard puts the case for commercial individualism and brand growth over industry handwringing
Whenever I hear someone say that what the industry needs is a concerted campaign to publicise the value of protection products generally or heighten awareness of income protection or critical illness (or whatever), my heart sinks. Oh no, not again! Please...
Yes, the prevalence of under-insurance is high and the market is struggling for growth, but the fabled ‘protection gap' hasn't even begun to narrow despite widespread awareness among key players and the efforts of the great and the good of the industry.
If consumers were more aware of these products, understood how they worked and realised what good value for money they represent, would they really want to find out more and become new customers?
It's an appealing thought, and even if life and disability insurance has been classically ‘sold and not bought', it's not too far-fetched to think that a proportion of consumers could be persuaded that a proposition is appealing and even be persuaded to part with some of their hard-earned for it.
But let's be realistic. For many people, and for a host of reasons, life, critical illness and income protection cover are low priorities.
Also, currently the size of the market is determined to a large degree by the number of advisers - and RDR may mean that the total adviser force will shrink.
So whichever way you look at it, the market isn't going to grow significantly - or even grow at all - anytime soon.
And anyway, how would these ‘industry campaigns' in which the market comes together for mutual benefit - and of course, lest we forget, the benefit of consumers - actually work?
Funded by one or more industry associations? Well they don't have the sort of cash for a significant advertising push on TV, radio, in newspapers, etc.
Funded by distributor firms? Well they would never think of putting their hands in their pockets for something like this, even if they stand to benefit from the increased sales. So it'll be the cash-rich insurers then.
But how much should each insurer chip in? A flat contribution regardless of size? The small firms cry out in horror. A contribution based on premium income? Maybe that's fairer.
But the big boys like Aviva and L&G at the top of the pile are already doing quite nicely, thank you, so where's their incentive? And why would they want to help out the smaller outfits?
If I were an insurer's head of marketing there is no way I would spend a significant chunk of my budget on some generic advertising aimed at a wide audience, the results of which would be pretty much an unknown and with no clear benefit to my organisation.
I'd rather spend it on a campaign for my proposition, aimed at my target market, and focused on my products and the benefits they deliver. It really is a no-brainer.
And if I were the CEO I would say the best way to spend money would be on better understanding of, and connecting with, customers, improving the customer journey, creating new channels and access routes, harnessing the power of technology and upping service to industry-beating levels - all things at which insurers tend to have performed poorly compared with firms in other retail sectors.
That would be investing in brand-building. That would be creating competitive advantage.
Competing. It's what it's all about. Ditch the ‘what are we as an industry going to do about this [insert whichever problem - there are many to choose from]?' mentality and the ritual group hand-wringing at the ABI. Go out and beat the pants off your competitors. That's the route to propositions that will turn consumers on.
It may even grow the market. It will take imagination, vision and innovation though - which could be a problem.
The calls for concerted industry action often come from traditional players - distributors and insurers - that are particularly struggling with difficult market conditions. The other day I was at an industry meeting at which two speakers called for an industry campaign to boost sales.
One was head of marketing for a major IFA support firm. ‘You really must mount a campaign to grow awareness,' we were told (yawn). ‘Guys, you have to give IFAs all the support and tools you can so that they can do a great job for their clients. They depend on your help.' Or words to that effect. It was (almost) heart-rending stuff.
Oh, come on. How much help do IFAs need? Are IFAs really so hopelessly weak? They're supposed to be professionals, expert in needs analysis, product selection and the rest of it. Can't they stand on their own two feet?
A major problem with independent financial advice is that it's a cottage industry. IFAs need to group together to develop scale, build decent brands and invest in improving sales effectiveness.
No wonder the banks are such prominent and well positioned players; the best of them (taxpayer bailouts, PPI mis-selling and LIBOR fixing aside) have all this down to a fine art.
But if you look closely at a market you can usually find a segment or two doing quite nicely despite the adversities. The ones that understand and can connect with customers, offer a good customer journey... etc. You get the picture.
And notice there's no bleating from the aggregators and e-brands moving into life and health after having made such a success of motor and household cover.
Peter Maynard is a director at risk management consultancy SelectX