The Financial Conduct Authority (FCA) gave the sector some “pretty good” grades in its Market Study interim report, but there is more work to do on improving service levels and closing the protection gap.
This is according to Peter Hamilton, head of market engagement at Zurich (pictured), who was participating in a panel debate at the Association of British Insurers’ (ABI) annual conference last week.
Asked specifically about how the protection gap can be closed, with the FCA considering extending the targeted support regime being enacted in the pensions and investments markets to protection along with other awareness campaigns, Hamilton stressed there were areas in which the sector is performing well.
“We’ve got some of the lowest premiums in the world,” Hamilton said.
“If you go to Australia or America, you often pay two or three times as much for the same level of cover. We often lose sight of that.
“We’ve got some of the best and flexible products in the world. We’ve got guaranteed premiums which you don’t typically get elsewhere.
“So we start from a pretty good place.”
Good grades
Hamilton maintained that the sector has been given some good grades by the regulator.
“If we were all waiting for the results of the FCA Review, like anticipating our A-level results to come through the door, then my sense was this is a pass with pretty good grades, while there are still some things we need to do better,” he continued.
Protection gap
Hamilton pointed to distribution as an example and the fact that while when he started out in the sector the number of life insurance sales people stood at around 300,000, today that number has fallen to around 12,000.
“And I reckon of that 12,000, only 5,000 sell protection on a regular basis,” Hamilton continued.
“I do think we’ve got access gaps for consumers. We saw that only 42% have got protection.
“That’s quite startling. The majority don’t have protection so that’s a challenge. And I was really pleased to see the recognition that the FCA will work with us proactively to help improve that.”
Two speed system
While the sector has done well in terms of embracing technology to dramatically speed up the time it takes to write a policy, it is still suffering from a “two speed” system, Hamilton maintained.
“So actually, if you’ve got a materially complex medical history, your chances have gotten worse, I would say, over recent years.
“And that’s a combination of recent service challenges.”
But there are many things the sector can do to address the problem, with AI offering a possible solution.
“There are loads of things we can do to fix it and I think we can use AI more to deal with levels of service,” he continued.
“The other bit that is hard though is access to medical records, so what might change there and be transformational for our industry going forward?
“Then as we look at the NHS changes as it moves from analogue to digital, the idea that we might get access, with the appropriate consent, to customers’ medical records is one of the things that can change that.”