LifeSearch CEO on how stamping out dubious tele-sales practices will help grow protection
The response of many commentators to the 30th anniversary of regulation has been to condemn its failure to stop consumers being ripped off while endlessly increasing the duties and costs it opposes on the law abiding. I see it a bit differently.
No police force can stop all crime, but they can reduce the incidence and marginalise criminal behaviour.
The alphabet soup of three decades' worth of regulators may well have been careless with the profit margins of those they regulate, but they have achieved their primary aim.
From endowments to deceitful tied sales forces, from high commission insurance bonds to PPI, great swathes of bad have been exorcised, and no ambitious entrepreneur or big business director would now dream of building product or process that is unfair to consumers.
The pensions and investment fraud that still occurs is far more isolated and smaller in scale overall, though the scammers and dodgers will ever be with us.
You could look at the positive side of regulation as the making of it harder for gullible consumers to be seduced by the salesman's half-truth and lie.
The regulated have to behave in a way that doesn't fool folk. But in protection there remains a channel where telesales teams, famed for the frantic energy of their outbound calling, still tread the imaginary line between guidance and advice that no consumer understands.
And as long as they utter the right incomprehensible mantras they feel sure they can avoid all responsibility for the consumer outcomes they cause. In short, they still fool folk.
At their fringes are the multiple complaint causing ex-PPI claimers, which insurers are getting ever-better at spotting and shutting down fast, but at the heart of the tele-sales market are several well run and admired businesses, who use the intentionally obscure title of ‘non-adviser' to camouflage what they do. Which is to tell consumers enough to get them to buy something, but not enough to take responsibility for what they sell.
That mindset of having people trained to sell, able to appear as people advising (even as they say they aren't) is what regulation has stamped out in investment and mortgages, and it's time protection too moved to end this egregious practice.
Legal tele-sales is a good commercial business model of course, with way lower training, monitoring and PI insurance costs, and if consumers end up not hearing about income protection or family income benefit, but get sold lots of critical illness cover and level term life instead then who's to know. Proving consumer detriment is hard when few claim or pursue those that didn't explain what they couldn't do when selling what they could.
It does, though, explain why growing the income protection market in particular is such a struggle. And it's that point that has stirred me to now urge reform.
The wider market is at last overwhelmingly keen to grow disability insurance (as they sensibly call IP in the USA), but I'm told by a leading provider in the space that up to a third of all protection policies (and that includes almost no IP ones) are sold by the non-adviser tele-sellers. Insurers would be very reluctant to see that channel closed, and the FCA would need to take a proactive interest in positive consumer outcomes, rather than trying merely to stop negative ones that cause complaints.
But despite these practical challenges to reform, no-one I've talked to contests that having people trained only to sell talking consumers into buying insurance over the phone is a desirable outcome after those 30 years of regulation.
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