The two words currently on everyone’s lips across our sector are the ‘consumer duty’.
As you know, consultation paper CP21/36 closed on the 15 February 2022, with the new rules applying from 31 July 2022 – although there is an implementation period of nine months up to April 2023.
This incoming piece of regulation is being introduced to protect consumers through higher standards and expectations of the level of care that firms provide, writes Emma Vaughan, head of protection services at SimplyBiz.
The consumer duty could result in a big change in financial culture and behaviour however, in my experience, the majority of advice businesses out there are already practicing these values by offering good products, fair prices and excellent customer service.
Conversations
I’ve had an increasing number of conversations in recent months about how we can protect more customers, and consumer duty plays right into the heart of that.
While the customer may not always be right, they should always be at the front, right and centre of all a firm does, from attracting new business through to retaining existing business.
Without customers we wouldn’t have our business and therefore should be providing them with the best advice possible for their individual situations.
Once we have a potential new customer, the focus should be on getting to know them and their circumstances as well as possible. There is now a need to forge a closer relationship with them than we may have before, but this will benefit everyone, and the customers of today are already looking for that added value.
As an adviser, you will already understand the vital importance of completing a fact find and getting the basics to understand a client’s protection needs, however, I believe we need to be going one step further.
We need to get to grips with what their short-, medium- and long-term goals are, and then offer them solutions to protect those goals in case of any unforeseen events.
Affordability
Cost has always played a major part in any protection conversation, but price does not always equal value.
We should be talking about what the customer needs and not what they can afford.
You can scale down from a comprehensive protection offering if the customer feels their budget will not stretch, but don’t forget that they have come to you for advice and therefore should be presented with the full picture before they can make an informed decision. The products you offer should be fit for purpose and not fit for budget.
Life insurance is still the most sold insurance product in our industry, but is there more value in talking about income protection as they are twice as likely to be off sick than dying?
Improve relationships
The biggest area in which you can make a difference is with your ongoing relationship with your client. Annual reviews are a good place to start, but a lot can change in a year.
I have seen firms who have had great success with quarterly emails to keep them in the loop with any updates from their client, or to touch base to check their circumstances haven’t changed.
Contact to highlight the additional services clients may have with their policies also gives advisers a reason to maintain the relationship. By talking through the benefits of what they have access to, and how they can get something tangible through their policy as well as take care of themselves and their families, could be all the difference it takes to keep that relationship for many years.
Consumers also need to be better informed about the additional services that they have access to through their policies.
Customers perceive the value of advice to be higher if they are engaged with their plans and their insurance providers, and this has recently been demonstrated in a piece of research that some of the insurers have undertaken.
This research has also shown that early intervention, or even prevention of an illness, can make a substantial difference to someone’s life and ultimately that is what the policy is there to do.
There may be instances where policies are cancelled or lapsed, and you may have been notified by the insurer by one of their early warning systems.
This gives you an excellent opportunity to reengage with your client, and understand if there are any financial issues and how you can support them.
You are in the best position to offer them new advice, tweak their policies to fit budget, and ensure that the best possible outcome has been delivered.
This article was written for International Adviser by Emma Vaughan, head of protection services at SimplyBiz.
