Telesales and misuse of bought data is damaging life insurance within the eyes of consumers. The industry must act before the FCA steps in...
If an industry does not self-regulate out those within it that abuse consumers it must expect increased regulation. I fear that time might be approaching the protection market.
Increasing numbers of customers complain of being harassed by protection tele-sellers using methods reminiscent of the PPI claims cold-calling storm.
I think they work like this: consumers considering buying protection, whether off their own bat or because their adviser recommended them to, almost all type ‘life-insurance' or similar keywords into Google and have a look around the many sites on the resulting pages.
They ask one or two for quotes and then either apply there and then, go back to their adviser or decide to do nothing. In the process they leave an online trail of their interest in the subject.
Tele-sellers can buy that data trail and feed their diallers with it. It seems a rash of them have acquired agencies from some life-insurers and make a business trying to sell protection to those to whom the data trail leads them.
That means they reach many of those customers who have recently taken advice and protected themselves wisely.
The customer is routinely confused by the tele-sellers swiftly impersonating either the adviser or one of the insurers, and often good advice ends up churned.
We know of situations where adviser firms contact lapsed clients only to find all sorts of ruses and lies, who then try their utmost to unpick the client's confusion, anger and growing lack of trust in all of us.
Of course, it is indemnity commission that encourages all such new start-ups. Banning it may seem sensible to some, perhaps including many high-net wealth advisers doing occasional protection business.
But for those dealing with people of all levels of wealth, every minute of the week, such a ban would be commercially fatal, for it would spread earnings over many years, whereas almost all the cost of advice and service and compliance are borne up front.
As all research has shown that almost no consumers would pay a viable fee level for advice on general insurances like protection, a ban on indemnity commission would utterly disintermediate the market immediately and well-nigh entirely. It's is the wrong weapon to use.
The temptation will be to hope GDPR will stop this consumer abuse, but there is nothing in the track record or behaviours of those involved to support that. The only certain method is for insurers to take more personal responsibility and carefully vet the business models of those seeking to open agencies with them.
If they find such high-pressure sales tactics they should not trade, no matter the financial strength of the potential agent.
They'd avoid the high lapse and clawback rates endemic among such sellers and save their reputations from the damage caused by the high non-disclosure rates also the norm at this end of our market.
The trouble is it only takes one or two insurers to care more about their short-term sales than their long-term reputation to empower substantial consumer abuse and mis-selling.
Unless the, ABI, their peers and their IFA customers can persuade them to change, eventually the FCA will have to step in. And that might seriously damage us all.
Tom Baigrie is CEO of LifeSearch
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The HAC, London
'Our past has been rife with some very poor intermediary practice'