Starting another year, it’s important to think about what went well, or not so well, in 2022 and what we have learned that might help us to do our jobs a bit better in 2023.
In the protection industry, as in the wider world, 2022 was eventful and sometimes difficult. For a salesperson in need of excuses for missing targets, last year would have offered a wide choice.
There is the impact of the cost of living crisis and soaring inflation, war in Europe and political instability at home leading to economic chaos, a poignant pausing of business as usual following the death of the late Queen; and maybe even the distractions of major sports events, including the football World Cup.
Yet, to their credit, few of those working in the protection industry seem to have used any of those excuses.
Instead, thanks to their efforts, the market seems to have performed well, even during a very challenging year.
At the same time, what was once a very disparate industry has become more cohesive during 2022.
There may still be a few stubborn cliques out there, but the old, tiresome divisions, based on different types of distribution rather than the quality of products and services, seem to be disappearing at last.
Pan-industry events like Income Protection Awareness Week have been embraced by brokers of all ilks and have served to increase understanding of a product which, particularly in a time of rising bills, is one of the most important in our repertoire.
Consumer Duty will dominate
To some extent, 2023 will see a continuation of market trends that were visible in 2022. The top priority will be an imperative to put customers first.
This will be driven in part by regulatory pressure: the compliance and operational implications of the Financial Conduct Authority (FCA) Consumer Duty Policy Statement, published in July 2022, with its key declaration that “a firm must act to deliver good outcomes for retail customers”, will loom over the industry.
Brokers will need to be able to prove that they have put the long-term wellbeing of customers at the very heart of their business models.
Providers will need to review and refine protection policies to ensure those good outcomes, around the quality, value and pricing of products and services; and both groups will have to deliver excellent support for customers throughout the relationship they have with them.
Anecdotal evidence suggests that many distributors and an alarming number of insurers are not yet taking Consumer Duty seriously.
The regulator’s grudging acceptance that some might take longer to meet their requirements should have acted as a wake-up call for our industry. If that call is not heeded, some firms will find that their failings lead them into serious trouble.
The good news is that those firms already actively seeking to put the customer first should have little to fear, even if Consumer Duty does require the application of significant resources and effort to provide evidence of compliance.
Indeed, there should also be a commercial upside, since a better long-term relationship with customers and a streamlining of processes are both key tenets of the regulation.
Customers must understand the value of protection
2023 is clearly going to be another challenging year for almost everyone in the UK.
That makes protection cover an even more important and valuable product, but it also makes it vital that brokers can help customers find a fast, straight forward solution to their needs.
That will be true not just for new customers, but also for existing clients, including those looking to remortgage; and those whose personal circumstances have changed, with a new home, new job or new family member, for example.
However, some customers may feel, as other budgetary pressures bite, that they can do without insurance.
Brokers must be relentless in their efforts to explain why failing to obtain the right cover would be a false economy; one that could leave customers dangerously vulnerable in the event of a financial shock.
Communication of that message – explaining the benefits of cover and the risks to which customers and their families could be exposed if it is absent – needs to be effective, clear, comprehensible and realistic.
Customers, mortgage brokers, insurance brokers and insurers will all benefit from the increased cohesion we have seen in our industry during the past year, with more firms working together to ensure customers are fully protected.
Those firms dipping in and out of the protection market may view 2023 as the year they eventually commit one way or the other and I expect we will see more partnerships on the horizon.
I have long lamented our industry’s willingness to congratulate itself when overall sales numbers remain, at best, static.
But hard economic times focus minds and firms with the right foundations in place, a fervent desire to protect more customers via a variety of mechanisms and an openness to collaboration and fresh thinking can seize this moment to grow.