Providers should consider offering a hybrid commission model to let advisers decide how much they receive up front and how much is paid as premiums come in, Cream Financial Solutions believes.
Advisers currently risk paying money back if they move a client to another policy in the first few years but earn a fresh upfront payment once that period ends.
The firm argued that paying less up front would take the timing out of the decision.
This idea is part of a four-point plan outlined by Cream to help close the protection gap highlighted by the Financial Conduct Authority (FCA) as part of its pure protection market study.
It found that 58% of adults do not hold any protection products.
Despite these concerns, in its final pure protection market study report, the FCA resisted taking action on loaded premiums, confirming it will not ban them.
Quick fixes
Cream believes the key to meeting this challenge is for the industry to focus on initiatives that can be implemented quickly and has made four areas of focus: referral pathways, social media, client conversations and commission.
It takes time to build expertise in a firm, Cream said. So an initiative would be to establish referral partnerships to give advisers the additional capacity they need almost immediately, such as in underwriting.
Advisory firms should also run social medial campaigns targeting renters and the self-employed, focusing on the reasons why they should take out cover, such as to protect their family.
Finally, advisers need to change the way they talk about protection in client conversations.
Consumers may not understand what income protection and critical illness mean, so advisers should talk about want matters to them, such as their children and their ambitions.
Good intentions
Cream managing director Simon Smith said when the FCA checks on progress, firms will want more than good intentions to show for it.
“Advice has become more specialised. It happened in wealth, where pensions and investments became disciplines in their own right, and the same can be said about mortgages and protection,“ he said.
“Most mortgage advisers are perfectly capable of arranging cover, but their focus is on the mortgage.
“If a firm can’t give protection the time it deserves, it must either invest in dedicated in-house resource, which not every firm will be able to do, or partner with a specialist to make sure its clients are properly covered.
“These pathways can be set up quickly and can ensure a firm’s clients receive better outcomes.”
On how the industry talks about protection, Smith added that no one wakes up in the morning and decides to buy critical illness cover.
“They wake up and buy a new pair of trainers,“ he continued.
“So make it real. Ask a parent what they do with their kids at the weekend and how they’d feel if they couldn’t do it anymore. The dance lessons, football training, the things that make their child happy – that’s what income protection pays for.
“Once people recognise its value, you don’t need to sell anything to them,” he said.