Ned Cazalet, founder of Cazalet Consulting, said the protection industry in the country is spending far too much money on new business, largely ignoring lapse rate and customer retention, while speaking at the Protection Review conference on 23 June.
Giving out statistics, he said the industry spends around £300 on an average per household or £7 billion per annum in total. Taking the lapse rate and claims paid into account, net outflow amounts to £80 billion every year, making the protection industry unsustainable.
“The whole thing is bonkers, it’s absolutely crackers. Much of new business is recycled from other life offices”, Cazalet said adding that the industry has witnessed net outflows during the last seven years.
If the industry wishes to remedy the situation, they should rather focus on the reasons for customers leaving the industry and take steps to ensure that they continue with their existing policies.
“The customer is sorely missing from the post sale conversation. We need to focus on how to make these products stickier and how we can make protection easier and more accessible”, Cazalet said.
Emphasizing that the relation between the provider and the adviser needs to evolve, Cazalet said insurers can look at the models supermarkets follow to create brand loyalty with regular benefits and offers.
The industry was already looking into lapse rate, claimed Steve Parkinson, managing director of Capita life and pensions.
“Life companies have turned their attention to client retention, but access to up to date contact details hinders them. I would be surprised if companies have the correct details for 25% of their customers”, said Parkinson.
“If banks turn their attention to the life sector I think that it would be a big wake-up call for the industry”, Parkinson added.
Setting up a new policy for a client is easier than renewing an existing one, said one participant, pointing out the barriers advisers face.
“The companies need to make policies more flexible, easier to top up and easier to renew”, said Michael Aldridge, sales director at London & Country and rued that it is a “constant frustration” for advisers since the industry refuses to make the procedures less complex.