05 AUTUMN PROTECT NEWSLETTER Continued on next page... protection market, the incentives that commissions create, and the effectiveness of regulation and features of commission schemes such as clawback in mitigating incentives and conflicts of interest. • Firms’ behaviour and practices: how firms’ incentives impact their conduct in relation to products, the market and their treatment of clients. Most of the areas outlined will cover the manufacturing and the distribution side, including pricing and access to products via Intermediaries. In terms of access to products for intermediaries, whilst I mentioned earlier that the number of Insurers manufacturing Protection products has declined, we are still seeing innovation in differential product availability in a number of areas, especially when it comes to details around how certain Insurers view and price for risk. Vitality recently produced their 2024 claims and what stood out for me, it was similar to that of many other Providers who similarly produce their 2023 Stats. What did stand out for me in that document was the fact that, in 1 in 7 cases, Serious Illness paid out where a normal enhanced Critical Illness Product would not. Similarly, 1 in 13 claims paid again where a previous other Serious Illness payment had already been made on the plan Whilst their product has both fans and detractors in the Intermediary space, the fact that all of those operating in a Whole of Market space have the ability to advise on that plan is testament to innovation and differences in what we witness in today’s market, compared to those operating limited panels. Similarly some Providers will offer terms on a particular illness where some will implement exclusions on payouts on “high profile” illnesses like MND. Such differentials do call for better education of advisers and with the added value of using technology such as Underwrite Me, Protection Guru and CI Expert to support them in finding the right solution for the client, just as it is used in the Mortgage market to find the right product for the client from hundreds of Lenders, there are little excuses in normal market distribution to work with anything but a Whole of Market panel. Not to have a full range of products in the toolbag is like playing a Championship Golf Course with half a set of clubs, and expecting the same result as someone with all of them! Although losing some Providers is, in my view restricting, it can and has created innovation for others and I believe operating a Whole of Market principle like Paradigm do is as important now as ever. Artificial Intelligence describes a Whole of Market approach as “Whole of Market involves financial advisors offering products from the entire market, without being restricted to certain providers or products. They act independently, reviewing all available financial products and providers to offer the best solutions for their clients' specific needs." When asked which is better, AI tells us “For clients who prioritise choice, independence, and bespoke financial solutions, the whole of market approach offers superior flexibility and impartiality." We have also seen in recent weeks that the regulator is starting in earnest it’s review of Consumer Duty implementation especially focused on Fair Value. Firms are being asked to continue to assess whether they are providing consistent fair value to their pure protection customers now. When conducting this assessment, firms will need to demonstrate that they are providing fair value for customers and that the price customers pay for products is reasonable compared to the overall value they receive. Throughout this assessment, it is essential that firms:
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