Comment: Free fall - consumer incentives

Are incentives detracting from protection’s core aim?

With the price of fuel, gas, rent and mortgage payments rocketing, consumers are looking for any discounts or freebies they can lay their hands on.

Financial services firms have recognised this and are offering people free or discounted gym membership, air miles and holidays as part of their product package. While these products have an appeal, it is questionable whether the tie-up is really appropriate.

PruProtect has partnerships with the gym chains Virgin Active, Cannons and LA Fitness, as well as health and wellbeing specialist Proactive Health and Allen Carr’s smoking cessation books and guides. These arrangements do seem a logical fit for an insurer that is targeting the fit and healthy. So too does Pru’s partnership with Sainsbury’s, which allows policyholders to earn Vitality points when they buy fruit and vegetables. If insurers are about financial protection in the event of ill-health, why shouldn’t they help prevent ill-health from occurring in the first place?

But companies now seem to be moving away from the focus on health and are offering incentives that appear completely unrelated to the product’s core aim. Pru is now offering access to discounted Cineworld cinema tickets, reduced rail travel by Eurostar and discounts on trips with Mark Warner, the holiday company.

Of course, there is a very tenuous link that going on holiday is good for mental wellbeing (depending on who you travel with), but if someone goes to lie in the blazing hot sun, drink lots of alcohol and eat lots of food they could come back in a much worse state. Going to the cinema has no health-related benefits at all, and appears to be giving people even more excuse to binge on fizzy drinks, popcorn and pick n’mix. PruProtect points out that customers will only be able to access these discounts if they have engaged with Vitality in the first place, so hopefully this will counteract the popcorn/sunbathing splurge.

Pru is not the only company targeting consumers with incentives. Lloyds TSB has introduced an “Airmiles Mortgage” which gives people 6,000 free airmiles after their mortgage starts and then 50 miles each month for the length of the mortgage’s fixed-rate period. Is it really appropriate to use hooks like this when we are in the midst of a credit crisis?

Whatever the incentives used, providers need to ensure they do not move too far away from the original mortgage or insurance product. Consumers need to make careful decisions when they buy financial products and must not be blinded with offers of free holidays and the like.

PruProtect’s product is already complicated and IFAs have to spend a significant amount of time explaining what it covers and what happens in the event of a claim. Adding on freebies could make this task even more difficult.

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