Life sellers must lay down the scattergun

THE life assurance industry - for long the black sheep of Britain's financial services - is struggling to mend its ways. But its response to the barrage of public criticism and the tougher regulatory regime it now labours under has been disappointing.

Essentially, life companies have missed the point. So determined have they been to comply with the letter of the new rules, that they have failed to address the bigger issue. That is, how to rebuild the confidence of consumers and secure a viable future in the long-term savings market. Failure could mean the end of the insurance industry as we have known it.

Contrary to what some in the life industry appear to think, the sector's biggest problem is not regulation. The new rules may lay down an unduly prescriptive, cumbersome and costly way of forcing companies to heed the interests of consumers, but they are only enforcing a philosophy that should be central to any life company with a long-term commitment to the UK market.

In my view, the industry has a greater difficulty: its slowness in recognising the fundamental shift that has taken place in recent years in consumer attitudes and expectations.

Despite the new disclosure regime, designers of life products remain obsessed about points of detail that are all too often lost on the consumer. Huge amounts of energy, ingenuity and money are still being expended on devising over-complicated policies to meet straightforward needs. Little wonder that life products are no longer seen as relevant by large swathes of the population.

Most life companies either make blind assumptions about consumers, without trying to get a proper understanding of what they actually want. Or they research consumer attitudes thoroughly but then fail to take the findings into account when designing products.

This is not just a case of consumers being sold products they do not need or want. All too often they do not even understand what it is they have bought. Many life offices retain the notion that people do not - and perhaps cannot - understand finan- cial products. Hence they do not provide the facts that consumers need to judge whether or not they are getting a fair deal - a failure that the new regulatory regime has done little to correct.

Consumers want to know exactly what they are buying and how much it costs. The disclosure rules provide some help, but the quantity of information they stipulate - and the way in which it is presented - probably leaves people more, not less, confused. Even for the most sophisticated buyer, it only allows comparisons to be made between life offices. There is still a reluctance to tell customers exactly what proportion of their premiums will go in charges and what will be invested for their benefit.

Eagle Star's answer is to cut through this jungle by instituting a simple and transparent charging structure on a new generation of policies, announced this weekend, which with the help of a new and more flexible computer system eliminates "hidden" costs such as bid/offer spreads, exit penalties and the like.

Life products also have to be more flexible. Historically, they have been highly rigid and even the newer generation of policies marketed as ultra flexible are often fairly unadaptable, or provide flexibility only at a price. People who need to change life, investment and protection policies still tend to face swingeing fees, while cancelling policies early can render them virtually worthless because of exit charges.

All life companies have to offer better value for money by reducing expenses and charges. The current industry average of one transaction per salesman per week is absurd. That one sale has probably emerged from phone calls and personal visits to up to 200 other potential customers, all of which - in effect - the single purchaser has to pay for.

This scattergun approach to selling, combined with the pressure placed on the salesperson, is responsible for much of the low esteem in which the industry is held. It has not only fuelled resistance from consumers, it has also inflated the cost of insurance products and reduced their competitiveness against other financial services.

To escape this spiral, the life industry needs to change its atittude to selling. It should concentrate more on building long term relationships with existing customers. Salesmen, in other words, should be trained - and given incentives - to advise and to nurture their clients, not just to sell.

Logically, the insurance industry is best placed to assume the mantle of responsibility which governments are shedding. Regaining the hearts and minds of consumers will not be easy, but insurers should start with some radically new thinking.

q Dr Ian Owen is managing director, Eagle Star Life.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

    Greece referendum

    Greeks say 'No' to austerity and plunge Europe into crisis
    Ten years after the 7/7 terror attacks, is Britain an altered state?

    7/7 bombings anniversary

    Ten years after the terror attacks, is Britain an altered state?
    Beautiful evening dresses are some of the loveliest Donatella has created

    Versace haute couture review

    Beautiful evening dresses are some of the loveliest Donatella has ever created
    No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

    No hope and no jobs in Gaza

    So the young risk their lives and run for it
    Fashion apps: Retailers roll together shopping and social networking for mobile customers

    Fashion apps

    Retailers roll together shopping and social networking for mobile customers
    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate