The Thoresen Review has been hailed as a success for the COVER Promoting Protection campaign as it recommends the launch of a money guidance (MG) service to improve consumer awareness of financial needs. Will this help increase protection awareness and how else should the industry be promoted?
Roy McLoughlin, Master Adviser
As an adviser spending most of my time 'in the field' I constantly find myself in situations, particularly with younger clients, where people are extremely frustrated about financial matters. By their own admission many have little or no knowledge of some very basic financial factors and this is definitely a reason why we have so many gaps in protection, savings and pensions. The general public wants to be educated on a basic financial level and this is why, as a society, we still have a problem in understanding advice. I often hear people saying they wish these subjects were taught at school and, to a certain extent in the workplace.
Against this backdrop an MG service is an absolute no brainer. The fact it took Otto Thoresen to produce such a powerful review is, in itself, a little sad as much of what he concludes is stating the obvious. However this is often the only way the Government will sit up and listen so the review should be applauded. My concern is that it should not be forgotten and the advisory community must ensure this does not happen.
Protection is integral to this campaign and the crucial point is the more we help to educate, the more protection will be taken out. The equation is as simple as that.
Nick Kirwan, Association of British Insurers (ABI)
The ABI is pleased that Thoresen's proposals for a new national MG system included references to life and protection insurance. We have always encouraged consumers to think about their protection needs and cover against unemployment is particularly important with the potential for large scale redundancies in times of economic uncertainty. Illness or injury can strike at any time so having the right policy is vital to cover potential lost income.
An effective generic financial advice service in Britain could boost financial knowledge among consumers. If MG performs to its full potential, more people will be empowered to make better financial decisions and appropriate protection choices. It is in consumers' interests to be protected as well as make provision for retirement. Financial services share this interest to ensure customers have information on products to meet their needs.
MG should focus on all income groups to ensure everyone can access relevant financial information. The Promoting Protection campaign has a role to play in raising awareness among key stakeholders such as the Government, Parliamentarians and the media. If we can get messages through to these third party groups about the importance of protection as part of the range of financial products people should consider, this will filter through to consumers.
Ian Brown, Skandia
There is much scope for improvement to financial capability in the UK, not least in the area of protection. The efforts of the Thoresen review are therefore welcome news, although a significant challenge exists in order to turn concepts into reality. The MG service must show a clear differentiation between advice and guidance and clarity on when a consumer receives advice and when they do not. Unless there are specific controls and definitions in place, confusion could arise. As a result, consumers may believe they have received advice when they have not. Unlike the advice market, the MG service will not be covered by a compensation scheme so there must be clear risk warnings explaining the implications of not seeking advice. Consumers must understand when they have moved from the unregulated activities of MG to the regulated activities of the advice sector.
If implemented successfully, the MG service could potentially improve the financial situation of many individuals in the UK. Ensuring adequate protection is a vital part of financial planning, so this could be a positive step. In the meantime, an opportunity remains for the protection industry to continue to communicate the benefits of cover. Protection products are not something anyone would ever have a wish to use, but should the need arise, the benefits of making plans for unfortunate circumstances are clear beyond doubt. The industry needs to keep telling that story.
Ron Wheatcroft, Swiss Re
The protection gap continues to cast a formidable shadow over the industry. We must ask ourselves how an insurance industry that boasts of being among the most developed sees so many potential customers without adequate protection.
In 2007, Swiss Re researched why consumers do not purchase protection insurance. The common responses were they did not need cover, could not afford it, had not thought about or had not got round to it.
Over 60% of under 45s and more than 50% of people aged 45 and older relied on friends and family as a prime source of information on life and protection insurance. The apocryphal 'man in the pub' still seems to be a leading source of financial knowledge and prejudice.
- What has our industry done to discourage this view? Put simply, we have not done enough to spread awareness of the need for cover, focusing instead on price competition and, at best, treading water.
The MG initiative should help raise financial awareness. In a future that may contain fewer advisers this becomes even more crucial.
However, we cannot just rely on MG to deliver our key messages. As the spotlight grows on the need for pension provision, the industry needs to collaborate more closely to raise the value proposition of both individual and group risk cover.
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