Payingtoomuch's managing director Michael Ward has called for non-contestable life insurance contracts and an increase in premiums and commission in a bid to improve protection sales.
Speaking at the Protection Review 2016 conference in London, Ward said: "I think we need to introduce non-contestable life insurance. I have done some work in Canada and I have an office in Toronto."
"After two years, unless it's some sort of blatant fraud, they have to pay out. Being at the sharp end, I can tell you that the general public has a pretty poor view of insurance.
"They are always saying ‘you won't pay.' So I think if we introduce non-contestability, after some period of time, it would increase trust."
Non-contestability is common in the US and Canadian markets. If policyholders die in the first two years after taking out cover, the insurance company has a right to contest or question claims.
After that time has elapsed, normally two years, the life insurance policy usually cannot be contested for any reason other than non-payment.
Ward also said introducing such a measure would increase prices, leading to the fact that "we need premiums and commissions to rise."
He said: "Unless you're going to put more money at the sharp end, nobody will do the persuading [for people to take out insurance]. We need more commission. I said this last year and I'm saying it again. Nothing has changed."
Non-indemnity commission
Ward added: "It's not just a question of ‘Mr Provider can I have your +35% rate set'. I don't think that's the answer. I know it's a very emotional topic when tied salesforces sell increased or rated premiums. I think there's a better way.
"It goes something like this: If a £20 policy gives us £480 commission rule of thumb, £15 gives us zero commission because 25% of the premium is driving all of the commission. If you rebate it, you can go somewhere in between."
He concluded: "You get an instant payrise if you use non-indemnity commission, we do that for all of our indemnity cases over £3,000. You can get a payrise of between 25-31% if you use non-idemnity.
"What I'm suggesting is for that £20 policy, whose great idea was it to sell it for £20? I have no say in that as a distributor. Why can I not charge £25?
"If I'm charging an extra £5, I can double the commission from £480 to £960. I guess it's a rated premium but it's not ‘just make up new rates that are 35% higher and pay 40% lautro.'
"I've done something inventive with non-indemnity commission and I've quadrupled that over the initial £480.
"I think encouraging advisers to use non-idemnity where the non-indemnity period stretches out for 5 or 6 years, is an inventive way to change the way distribution behaves."
