Complex protection products put advisers off, says FCA body

By Christine Dawson

Sep 12, 2018

Overly complex protection products are putting mortgage advisers off discussing them, and putting clients off buying them, according to a study by one of the FCA’s advisory bodies.

The Financial Services Consumer Panel, a group that works with the FCA on policy issues, sought views from intermediaries, insurers, a reinsurer and mortgage lenders on issues and challenges in the protection market.

Their paper on the research published today says: “The benefits of income protection are hidden behind complex choices and caveats in the small print which mean advisers shy away from recommending it and consumers don’t understand it, or believe it to be of poor value.”

Complexity is also blamed for making the discussion around products take too long, meaning advisers and clients have less time to discuss them in the required depth.

Among the recommendations for narrowing the protection gap, FSCP says: “One thing is clear. It is time for the industry to develop less complex products that are designed for the needs of today’s customers in the modern labour market.

“Providers need to re-think income protection. The name needs to change and the product needs to somehow be made far less complex and easier to underwrite. Intermediaries were keen to keep the concept of income protection, but with more of the simplicity of critical illness.”

Most of those consulted feel robo-advice would not work in the protection market, the panel says, believing there will always need to be an element of human conversation when it comes to customers understanding their options.

“All felt the protection conversation would need a person to get the message across – even if this was a telephone conversation.

“Online-only would not provide the solution. There was also some concern that if mortgage sales became an online journey only, this would completely eliminate any protection ‘conversations’.”

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