Provider Opinion: Simple products and protection - a question of choice and communication

The simple products steering group must find a way to communicate as simply as possible the different options available

Over the past 10 years we have seen critical illness (CI) sales decline. So is it time the product was radically overhauled or do we need to do a better job of engaging consumers? While the current economic climate will undoubtedly have had an effect on a decline in sales, the complexity of the product might not have helped.

We should therefore be welcoming the idea behind the Treasury’s simple products steering group. The group will set out how to bring simple products to market, including how simple products should be structured and marketed to ensure consumers get the best deal. Carol Sergeant, the chair of the group, has already stated that designing the protection market’s offering will be quite challenging. So where should the focus of the group be?

Some would say that protection products are already simple and to an extent I would agree. But when you start to look at the range of protection products that are available this is where confusion can quickly manifest itself for consumers. Life cover is probably the easiest to understand of all protection products. However, there are still decisions to make around whether to take out whole of life or term assurance, a level, increasing or decreasing amount of cover, joint life or single life. Add to that the option to take out critical illness (CI) cover and income protection and you can see why the uninitiated might be confused.

We need to recognise that different things are important to different people. Therefore it is important to offer choice if we are to attract a wide audience to our products. Taking away options to make things "simpler" won’t help people get the right product for their circumstances if they don't have the basic understanding and desire to purchase the product already. It shouldn't be forgotten, however, that protection insurance has provided financial stability and brought peace of mind for thousands of families over the years who might otherwise not have been able to cope financially. So any moves to make the product more appealing, not just for consumers but also for advisers selling the product, must be welcomed.

The basic issue is that there is a lack of understanding among consumers of both the existence and benefits of protection insurance. Therefore, the focus of the simple products steering group should be on finding a way to communicate as simply as possible the different options available. Then someone looking to purchase protection for the first time will be able to make an informed decision on what to buy.

Ian Smart is head of product proposition at Bright Grey and Scottish Provident.

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