The recent DWP update on Universal Credit presents the protection industry with a 'wonderful opportunity'
The natural pyramid structure of the protection market makes it difficult to unite around common goals, even when they are clearly of benefit to consumers and the businesses that serve them.
The fewest and wealthiest businesses in the sector are the eight or so re-insurers who underwrite perhaps 90% of all the mortality and morbidity risk. The cohort below them, in terms of number and capitalisation are the insurers, perhaps 24 of them, the big ones all conglomerate businesses.
The bottom tier are the 1000s of distributors, many banded into compliance and administration networks, but almost all relatively tiny businesses. This tripartite psychology of disinterested global capitalists, diversified PLC's and the disparate private companies they rely on to reach consumers has always found it very difficult to align and so drive improvement.
But that is changing fast right now for two key reasons:
- We are in a post-modern era of regulation, where change is driven by quasi-cultural legislative demands such as diversity, accessibility and data integrity, rather than a specific single rule-book. This is encouraging all three cohorts, but most importantly the top two to become far keener to be visibly active in helping all consumers get a fairer deal.
- The distribution market is consolidating rapidly, with some 70% of the policies arranged through more focused specialist protection distributors and networks. That group is building further unity through the Protection Distributors' Group. The best thing about us is that we are not a trade body, but a group specifically focussed on improving what our market does for its consumers.
The end result is that all three layers are ever easier to align. And given the current cultural imperatives that must be to the benefit of the consumer. Which in the longer term only ever benefits the whole market.
Add to that a change in the way private insurance is viewed by government, the biggest influencer of them all, and the prospects get very interesting. The change is that the DWP, after six years of brave and persistent lobbying by Ron Wheatcroft of Swiss Re; Johnny Timpson of Scottish Widows and Richard Walsh, who consults to the all-industry Income Protection Task Force, has started to improve the way Universal Credit interacts with privately arranged cover. There is a way to go, but the direction of travel is to reduce the long term burden on the taxpayer by encouraging people who can to make their own provision, knowing it won't invalidate the state's support.
This provides the industry with a wonderful opportunity to build policies that are structured to work well with the new rules, which should also allow them to be made much simpler and easy to buy. In my 37 years in protection I've not seen an opportunity for improvement like it. And just now I think we will be able to take that chance and take our market back into the consumer mainstream once more. Here's hoping!
Tom Baigrie is CEO of LifeSearch
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