Leaders from major protection insurers have called for the sector to have an honest conversation about loaded premiums and commissions, with one CEO saying they would be “delighted” if the Financial Conduct Authority (FCA) took action.
Speaking at Health & Protection’s inaugural Protection Forum yesterday, Isobel Langton, CEO of The Exeter told delegates: “I don’t think there’s a product provider or insurer that wants to pay loaded premiums. I don’t think we’re driving this.
“If the regulator wants to regulate it, then I think they should and I would be delighted if they did.”
Speaking a day after LifeSearch chairman Tom Baigrie called for the ending of loaded premiums, the panellists agreed it was time for an “honest conversation”.
So Langton (pictured far right) concluded that an open and frank industry-wide debate was needed.
“Maybe we’ve just got to have an honest debate about that in terms of what is this value chain?” she continued.
“What does the adviser need to get in order to run the business and be there and be sustainable? What does the provider need to make sure we can pay out the claims at the end and then what is the fair price for the premium.
“And I think we’ve probably just got to have that adult to adult conversation. You have the audience stats around do we work really well together; it was pretty average.
“Maybe we’ve just got to better at working together and I think that would be a real benefit.”
Adviser operating models
Rose St Louis, protection director of Lloyds Banking Group and CEO of Cavendish Online, (pictured furthest left) agreed, arguing the real point was how the loaded premium comes about.
“It comes about from commission. What is that about?” she said.
“Is that around creating a sustainable business? What’s the target operating model of the firm? How much do we need and how does that manifest itself through the value chain therefore the engagement with us as a provider?”
And she highlighted that under current terms the way commission was paid put a hefty demand on insurers before a policy was even on risk.
“You’re right. That commission payment is there and I’ve talked about it with my colleagues on the stage,” she continued.
“There’s a commission so there’s two times premium that’s rolled forward.
“Sometimes you’ll have that commuted as the trail and as providers we’re allocating a premium for the claim.
“So we’ve paid out three times commission already and we haven’t even got a policy on risk yet, it’s still going through underwriting.
“So there are different components and then you’ve got reinsurers that are looking at that, so you’ve got to look all the way through the value chain.”
St Louis added she was not volunteering to be asked to be allowed to facilitate loaded commissions and wanted the whole industry to take responsibility for it.
“Why is that being asked of us? And arguably to your point, why as an insurer am I being asked to police that?
“I am not a regulator. A regulator has oversight of my business so I think there is an honest and open conversation that needs to be had.
“I think there is a conversation about transparency and let’s blow that open and understand the business model and how we facilitate good sustainable insurers, distributors serving customers to give them great outcomes.”