Firms need to tread carefully when it comes to single tie arrangements, according to James Daley, managing director at consumer group Fairer Finance.
And they must be prepared to “recommend that customers don’t buy their products if there’s any doubt about suitability”.
Daley told Health & Protection that as firms have an obligation to work to deliver good customer outcomes and ensure their customers receive fair value under Consumer Duty, they need to make it clear that there may be cheaper or more suitable products available for customers.
Significant trust issue
His comments follow the release of findings from LifeSearch earlier this month showing single-tie distribution arrangements carry a significant trust issue with customers and a material impact on their intent to buy protection insurance.
The research which forms the basis of a forthcoming new study – Distribution Redefined – found that more than four in 10 (42%) of consumers would be less trusting of their bank, building society or retailer if they discovered it only offered life insurance products from one insurer.
Only 14% of consumers said they wouldn’t trust them less, and a further 44% either did not know or had a neutral view.
Trust erosion was slightly more pronounced among building society members, with almost half (45%) stating they would trust their provider less under single-tie arrangements.
Tread carefully
“In a Consumer Duty world, any firm using a single tie arrangement needs to think very carefully about what they communicate to customers,” Daley told Health & Protection.
“Firms have an obligation to work to deliver good customer outcomes and ensure their customers receive fair value,” he continued.
“When it comes to a single tie, it’s unlikely firms are going to offer suitable or competitive products for all types of customers.
“Firms need to make it clear that there may be cheaper or more suitable products available for customers – and be ready to recommend that customers don’t buy their products if there’s any doubt about suitability.“