The falling number of protection providers in the UK market could be viewed as an opportunity or a threat according to advisers but either way, it is a key issue for the Financial Conduct Authority (FCA).
As a result, the topic of insurer competition was a major discussion subject for participants at the Health & Protection House of Lords roundtable in association with Royal London.
With Aviva’s takeover of AIG completed in April, there has been considerable concern among advisers about the state of the protection insurer market, and how it may develop from here.
Three insurers have left the individual market in barely two years with Aegon, AIG Life and Canada Life closing or being taken over. However, new entrants such as Blueberry Life, previously Bluezone, have arrived while Beagle Street intends to enter the intermediary market next year.
Shrinking numbers
With the FCA emphasising insurer competition would be a significant element of its market study into the distribution of pure protection products to retail customers, the issue of a shrinking number of providers was of concern to many roundtable participants.
Emergenzz Financial Services managing partner and CEO Sheun Oke highlighted one of the main problems from the recent changes.
“When it comes to diversity in access to insurers, I think we are shrinking,” she said.
“Clients really loved the AIG app, its simplicity and easy communication, and I think AIG challenged the market to make most of the insurers go towards value-added services.
“But now it is gone I don’t know if other insurers will be able to pick up on some of the gap that is being left in the market.
“Clients are really getting fewer and fewer choices.”
David Mead, founder of Future Proof agreed, and was also concerned that the contraction in the market would mean a reduction in competition among players resulting in negative consequences.
“The contraction in the market just makes it easier for bigger players to become more complacent,” he said.
“For advisers we want to have that choice specifically around underwriting where the departure of AIG has left a huge hole in service delivery.”
Look at the full picture
Part of the issue for many advisers may be about coming to terms AIG departure, but not appreciating the full picture.
Phil Jeynes, director of corporate strategy at Reassured agreed on one level with concerns raised, but put things in a more historical perspective and positive outlook.
“When you look at the market and zoom out a bit over a decade – rather than just the last few years – there are always comings and goings and rebrandings, so this is nothing particularly new,” he said.
“AIG was already going – so to an extent, there’s no point crying about that.
“And personally, if AIG was going to go somewhere, I’d rather it went to a big established, reputable, institution like Aviva, which is going to look after those customers better than others we could mention.
“So I think there’s a positive to take from that.”
Jeynes also put forward another positive of the new entrants coming in to or recommitting to the market.
“HSBC has really recommitted to the market recently, and that’s a whacking great brand,” he continued.
“Beagle Street are also coming in properly this year or next, and they have got some real ambition.
“And Octopus have bought what was left of DeadHappy, which I think we would agree had its good points as well as its issues.”
And he noted how others had commented on how good the Guardian proposition was.
“Guardian is an institution that has been around for centuries but has recommitted to the market too.”
Options open
Paul Reed, director and co-owner of Vita agreed with the more positive view and said the range of options should not be underestimated.
“We feel the doom and gloom because we feel the loss of what went before with AIG and whoever else before them,” he said.
“But any new people coming into the industry should look at all the options as there is still a good wide range of insurers out there.”
Furthermore, Women in Protection chairperson and director Emma Thomson questioned whether advisers were really taking full advantage of the range of options that already existed in the market.
“There are lots of insurers and lots of options out there, but are they being fully utilised by advisers?” Thomson asked.
“Even within the brands that we’ve got, we’ve got new products coming out.
“For me, we need to look beyond the insurers and consider what products we’ve got access to.
“If loads of products were getting closed and we were going back to very simple life cover, I’d be far more worried about that than losing insurers and having a really wide range of options.”
Immigrants denied
Another important issue raised about insurer provision was that of new immigrants coming into the UK and not being able to gain access to insurance.
Oke spoke of cases she had been through with people coming to the UK from Nigeria or elsewhere in Africa, who had been unable to get cover because of limited access to medical records.
“Why are we suddenly shutting some people off, when assuming something negative?” she questioned.
“If a person has a clean bill of health, why can’t we just treat them as normal and give them insurance?”
Oke added that her firm was feeling a big gap in the advice space in that regard and that this could create negative connotations that insurance doesn’t pay.
However she has been keen to tell them that really the truth is quite the opposite.
“I’m saying insurance does pay – just make sure you give the right information, that is the education bit,” she continued.
“It is hard for people who have just come into the country to be told ‘sorry, you’re not eligible for insurance’.”
From the insurer side, Royal London proposition specialist for protection Jennifer Gilchrist noted the mutual was having wide discussions to build diversity behind its product offerings.
“We’re speaking to all different people including advisers and a lot of customers,” she said.
“That’s how we are building in diversity. It’s not just us and the people within Royal London.
“It’s building in those conversations about different people’s perspectives and how we should approach it.
“It isn’t one size fits all, but it’s about doing that research to help build and grow and get a proposition that sits better.”
However Nina Brown, protection adviser at Pam Brown Mortgages, noted there needed to be a balance when addressing customers with limited medical histories.
She highlighted cases of people coming in from areas of Eastern Europe who had made early claims on their insurance.
“In some cases there are too many claims for it to be incidental,” she said.
“How can we serve that market while most importantly protecting the rest of the group? You have to think creatively a bit more because that experience is going to impact the wider community.”
Download the roundtable supplement for the discussion by following this link.
