11th January 2024

The Protection Distributors Group

The Protection Distributors Group is urging all UK life and protection market firms to heed and act upon the speech given to the COVER Health and Protection Summit by Lisa Sturley, Head of Market Interventions, Insurance Supervision at the FCA on 2nd November 2023. 

The specific examples given, of areas where our market could be failing consumers and causing detriment, are ones we feel life insurers need to address with urgency and implement a clear focus on what’s best for the protection consumer. Ms Sturley urged manufacturing insurers to “monitor your distribution channels…and ensure fair value”, asking,” How well do you know your distributors? Are they aligned to your principles? And what are they doing to maintain your reputation and the Consumer Duty that you have worked so hard to implement?” And noting, “Manufacturers, you play an important role in overseeing the distribution of your products.”

We will be writing to the CEOs of all the insurers our members trade with, to ask them how they will stop the consumer detriment caused by three key concerns highlighted in the speech: loaded premiums, claims administration and non-advised tele-sales, in addition to ensuring vulnerable customers are properly supported. Two of these elements of Ms Sturley’s speech particularly resonated with the PDG; loaded premiums and claims. 

The PDG has long held the view that loaded premiums are unfair to consumers. Ms Sturley drew attention to “the practice of increasing premiums to gain greater commissions without any demonstrable value-add. So called loaded premiums.” And she poignantly noted, “When we see practises like this, we will be more intrusive. We will ask questions. We will ask you to justify the practice and the value.”   

The PDG believes that to fulfil fair value obligations, insurers should offer a common premium to all intermediaries. If they wish to pay more commission to some, they should do so from their own profits, rather than allow some distributors to inflict loaded premium levels on unwitting customers, simply to earn more. Consistent with our purpose to improve what our market does for consumers, the PDG would therefore like all loaded premiums to be abolished by the insurers who currently offer them. 

The PDG through our Claims Charter, which almost all insurers have signed, has sought to improve the way insurers help those most in need of it. Whilst payout rates remain strong, our members have been highlighting that particularly since the pandemic, the time to assess claims has worsened leaving already vulnerable claimants in an even more vulnerable position. Our charter will evolve next year to include an analysis of assessment times, and it was particularly welcome to hear this issue covered in the speech.  

Ms Sturley focussed on post-sale interactions and claims, stating “We want to see customers getting the support they need. After sale support should be as good an experience as the buying experience. In their moment of vulnerability, your service and products need to stand up.” In particular, Ms Sturley highlighted a recent review of terminal illness benefits which 

revealed claim times averaging three months. “Not up to three months - averaging three months” she said.  

Ms Sturley referenced the 4 areas of FCA market priorities, in relation to the Insurance Portfolio Letter issued in September. The PDG are drawing attention to the third of the market priorities, which is to "focus on minimising the impact of operational disruption.” Ms Sturley stated, “We have been particularly concerned with the level of governance, oversight, and contingency planning when services are outsourced.” She gave examples of potential operational disruption that may result from the threat of cyber-attack, or the potential loss of customer data.   

We are therefore asking insurer CEOs to explain in detail how they plan to speed up and improve their claims handling service. The PDG believe insurers should ensure claimants receive at least the same, if not better, levels of service than new business applicants, and that these service levels properly meet the needs of claimants, who by definition could also be vulnerable customers; a group Ms Sturley specifically highlighted as needing proper consideration by manufacturers.  

Consumers need the protection our market can provide them more than ever. To serve consumers best, protection needs to earn their trust, and the way to increase consumer trust and ultimately protect more people is to improve industry practices, with both manufacturers and distributors treating consumers in a way they deserve. 

Protection