The Association of Independent Financial Advisers (Aifa) has said that the Financial Services Authority (FSA) should have conducted a retail market review rather than just focusing on distribution. Do you agree? How much will the Retail Distribution Review (RDR) affect the protection market?
Roy McLoughlin, Master Adviser
The problem we are all facing is simple - there is an unacceptable protection gap, and we have to be honest with ourselves as the major distribution channel, and admit that we are just as culpable as the others. A wide-ranging retail market review would help, but industry experts could sit around tables for days debating what this means and in what form it should manifest itself.
So why are people not taking out protection, and importantly, how can we resolve this? Are distributors responsible for perpetuating the protection gap?
The RDR is important and must be looked at positively, but protection must also be handled very carefully in the context of the points made above. Protection still needs to be advised on, and the client will ultimately decide how the distributor is best remunerated. However, we must be careful not to rock the boat too much - analysis of how clients purchase and how they will be prepared to continue purchase protection products will provide IFAs with the answer.
The industry seems to forget that it can discuss the best ways for it to evolve, and that the most important person in the whole equation is the client or customer. Only then will we start to solve the problem of closing the protection gap.
Jonathan French, Association of British Insurers (ABI)
The RDR has been a useful exercise in concentrating the minds of those in the financial services industry. We have contributed fully to the review process, and we await the FSA's conclusions and recommendations with interest. The concepts of increased professionalism, transparency and clarity are relevant across the whole financial services industry. We have been clear in voicing our support for them throughout the debate, and when the time comes, the insurance industry will play its part in implementing them.
The FSA's focus on distribution of retail investment products is broadly right. It makes no real sense to leap headlong into a review of the whole market - better to get one aspect right then use the review model to examine other aspects as and when is appropriate.
While the protection market has been outside the scope of the RDR, some aspects of it will be relevant. Consumers of protection insurance expect appropriate and transparent products and services to be offered to them. The ABI has proposed a new sales process, called Assisted Purchase, that matches consumers with products that meet their basic needs - simple protection products must be included in such a process.
We will need to see whether the solutions proposed for the investment market could also be appropriate to meet the challenges that exist in protection.
Andy Couchman, Bank House Communications
After 18 months of consultation on the RDR, we now only have to wait until April to find out the regulator's interim views on where we go from here.
However, remember Deep Thought, the super computer in Douglas Adams' Hitchhiker's Guide to the Galaxy? It was asked what the ultimate answer to life, the universe and everything was, to which its answer was "42". Then it was found that the ultimate question was "What is 6 x 9?". Meaningless? Unhelpful? Exactly. I was reminded of this issue about the right question by Aifa's response to the RDR. Certainly, there are flaws with the distribution model, but Aifa is right to remind the industry that the bigger picture is why, as a nation, too few people provide for themselves. Why are we under-saved, under-pensioned and under-protected, but over-indebted?
Will RDR help answer those much bigger concerns? In the five years since the launch of the Protection Review, distribution has never been top of the industry's concerns about its future, and I do not expect it to be in this year's review either.
But that will not make the RDR go away. So, perhaps our strategy now should be to manage the FSA's proposals, help make them workable, then look at how we can close the various protection gaps. It may not be "42", but it is the best answer to the public's real concerns.Peter Hamilton, Zurich
At one level, it makes complete sense for a broader review and for the RDR to cover protection and mortgages, but life and pensions are not necessarily that simple.
The review addresses issues that are specific to the investment market, but there are themes that are common to all markets, such as competence, sustainability and consumer understanding. There is a logic to linking the different advice elements to ensure a coherent customer presentation.
The RDR is unlikely to be implemented as currently defined. Right now, there are elements that are not easily transferable to a protection environment. Customer-agreed remuneration should be encouraged rather than mandated in the investment arena; it is much harder to see it adding value in the protection arena where commission works well. The price the customer pays for a given level of cover is very visible.
Customer-agreed remuneration, if imposed on the protection market, could easily mean a significant widening of the protection gap, with customers looking to buy direct and without advice, or not buying at all.
One reason for broadening the scope is simply the sense that protection currently gets overlooked by policymakers, evidenced not least by the pensions term episode. The State is increasingly passing risks to individuals, and we need a coherent view on the role of private provision.
