Life sellers must lay down the scattergun
Sunday 10 September 1995
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.
Derek Pain: I'm cautious, but remain one of the few bulls in the market
Donald MacInnes: Who would want to be a Barbie girl in a non-Barbie world?
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
- 1 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Ball pool for adults opens in London
- 4 Game of Thrones season 5 trailer: The first full-length look is here
- 5 Rashida Jones speaks out against male-centric porn saying 'women should have sex and feel good about it'
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
King Abdullah dead: We can't afford not to hold Saudi Arabia's royals to account
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion