Despite the popularity of using a Price Comparison Website (PCW) to search for General Insurance, experts and the Financial Conduct Authority (FCA) have raised concerns over not just the compliance of the sites, but also their effectiveness in providing the right cover for consumers.
Do comparison sites really save time and money?
Consumers choose a PCW because of its perceived ability to save time and money. But consumer research by the FCA has revealed that obtaining a quote is rarely a quick process. In fact, research found that some comparison sites demanded answers to over 60 questions in order to obtain a Home Insurance quote, with many finding the volume of information and number of variables surrounding General Insurance products confusing and sometimes overwhelming.
Once consumers did reach the results page, not only did they find the options confusing, but there was also a lack of ability to compare like for like policies as well as cost. Often the lowest premiums would take priority, but the cheapest option is rarely providing the ideal cover, leaving the potential for long term consumer detriment.
Do comparison sites Treat Customers Fairly?
On the back of research undertaken in 2014, the FCA have highlighted that “a focus on price could distract from crucial product features and lead consumers to make an inappropriate policy choice that does not suit their needs and requirements”. In fact, PCWs will actively avoid going into the required detail regarding product options, in order to maintain the perception of speed and ease.
Consumers often have preconceived ideas about comparison sites, assuming them to be impartial and all-encompassing. But as the selling point of the sites is to provide a quick and easy way to compare insurance, it can often fly directly in the face of FCA guidelines on Treating Customers Fairly. Unfortunately some consumers currently use the site as a replacement for an adviser, assuming that the product they are guided towards is the best option for their circumstances.
Why is choosing an adviser a better option?
Choosing an adviser over a PCW gives consumers access to expert advice, industry connections and the knowledge that the adviser will find them cover tailored to their needs. To help in the battle against PCWs advisers now have access to tools like Paymentshield’s Premium Flex, which gives you the option to reduce premiums and bring down the cost of the policy. This means you can now deliver the best of both worlds; the perceived benefits of a comparison site, but with the peace of mind that comes from knowing they are offered the best products for their needs.
The FCA recognise that social media marketing is an area of your business that will only continue to grow in the coming years. Their newest guidelines on how to use social media for financial promotions reflects their supervisory approach, which allows advisers to stay compliant whilst enjoying the benefits.
Head of Compliance Stephen Adams has a quick guide to the new document, to help you get a better understanding of how to use social media safely:
What are the guidelines?
The FCA have stated that the definition of a financial promotion within social media is: “An invitation or inducement to engage in financial activity.” This is a key definition and one that applies across all communications. The FCA states that “there are requirements to include risk warnings or other statements in promotions for certain products/services. These rules are media-neutral and therefore apply to social media as they would to any other medium.”
The FCA are also keen to highlight that: “The requirements to be fair and not misleading imply balance in how financial products and services are promoted, so that consumers have an appreciation not only of the potential benefits but also of any relevant risks.” This is an important clarification which ensures that the restrictive nature of social media does not excuse firms from displaying the associated financial risks.
The two most important questions to ask before posting are: Is this a financial promotion according to the FCA guidelines? Am I able to display and balance the potential risks within the communication?
What about word and character limits?
The guidelines have been the subject of some debate between the industry and the FCA, with much of the discussion surrounding the limits and brevity of social media posting, potentially making it difficult to fully comply with regulations in just a small piece of content. The FCA has therefore suggested that firms’ use of word-restricted channels should be limited and not used if promoting a complex feature or service. If you do decide to use it, then you still have the responsibility to ensure it contains the minimum amount of information required.
To help with character limits, the FCA have suggested: “It may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself.” In other words, make sure that you are only promoting financially when all the associated risks are displayed on the communication, otherwise it must remain neutral as an advertisement.
What about sharing, liking and forwarding content?
To know when sharing, liking or forwarding a communication is compliant, check whether it originated from a customer or another FCA regulated firm. Although it is always the responsibility of the original communicator to ensure the post is compliant, the FCA does insist that when “a firm re-tweets a customer’s tweet, the firm is responsible as the communicator, even though the firm did not generate the content of the communication”. The FCA also maintains that: “Firms should ensure that their original communication would remain fair, clear and not misleading, even if it ends up in front of a non-intended recipient”.
What about using images?
Using images to promote is very popular on social media, but you still have a responsibility to ensure that your visual communication is not just compliant, but fully responsive on all devices such as phones and tablets.
If images contain a tagline that directly calls the consumer to action, such as “come and see us” or “save money here”, then they must also display the associated risks. If not, then it must remain solely as a visual advertisement.
When should you be careful?
Firms regulated by the FCA must be careful at all times when using Social media. The FCA also reminds firms “of their obligation to have an adequate system in place to sign off digital media communications.” Sign-off of social media communications should always be a person of appropriate competence and seniority.
Please remember, this is only a guide! So be sure to read the full FCA Guidelines to ensure you are up to speed on the latest on how to safely use social media. We also recommend contacting social media specialists Social Advisers through the Broker Zone website.
The need for Critical Illness cover has once again moved into the spotlight on the back of crucial findings from Cancer Research UK. They now predict that 1 in 2 of the UK’s population will develop Cancer at some point in their lives. Combined with the ground-breaking advancements in treatment pushing cancer survival rates beyond the ten year mark for half of adults diagnosed, protecting your clients and advising them on Critical Illness cover continues to be an essential part of your role as an adviser.
Sadly, despite the numbers the UK is drastically under-insured. This month’s Insight into Protection will explore some of the big issues, providing you with some of the facts and advice to raise awareness and discuss protection with your clients. We believe that by working together, we can close the UK protection gap:
What are the Facts?
50% of the UK population will develop cancer
It is still so surprising how many of the general public are unaware of the real numbers surrounding Cancer diagnosis and survival rates. It is a difficult and sensitive subject to tackle, but whether it be through loved ones or personal experience, a large number of us will likely be affected by the disease. Sadly, it can often take a tragic occurrence to make us stop and think, which is even more reason to encourage your clients to approach Critical Illness proactively.
50% of adult cancer patients are predicted to survive 10 or more years
Cancer survival in the UK has doubled in the last 40 years, a clear indication of the steps we have made to battle this terrible illness. It is this crucial fact that will be pivotal to your client protection discussion. This is difficult, as most people instinctively protect material investments such as their home and goods. But they will also want to cover themselves against the most likely scenario, which means given the facts, clients will want to ensure they are financially covered.
UK Households spend just £7.80 a month on medical insurance
According to the Office of National Statistics, under £10 is spent a month per household on medical insurance, compared to £22 spent on household insurance. Research from a top provider also suggests that 5.2 million UK mortgage holders who earn an income have no plan or protection cover in place to cover their mortgage repayments if they become too ill to earn, another reminder of the current UK protection gap.
Why is the UK lacking Critical Illness Cover?
Protection myths
One of the most damaging myths surrounding Critical Illness is that providers go out of their way to ensure they do not pay out on an insurance claim. This could not be further from the truth. In fact, several providers have proudly released figures regarding their Critical Illness claims for 2014, showing pay-outs of over 90%. One leading provider even announced that over half of their 2014 claims were settled within 21 days, with the quickest taking just two days to process. Reasons for the rare instances of non-payment were non-disclosure of medical information and more commonly, instances where illness definition was unfortunately not met.
Consumer reliance on state support, employer or savings
Unfortunately, some consumers believe that the state would cover them financially if they were not able to work for long periods. But state support is there to ensure individuals are not immediately put in a desperate situation, it is not there to protect an established lifestyle and maintain the financial commitments that come with it. Incorrect assumptions on how long employers would provide full pay, or how long savings would last are also common. So take the time to use current figures and calculations to show your client the facts around financial protection.
What can you do as an Adviser?
Prove your credentials
Nobody wants to be scared into buying a protection policy. Use software and applications such as the CIExpert comparison, to show your client the true value of their policy, not just the priced premium costs. LV’s Risk Reality calculator is just one of many useful tools that providers offer, to assist you in the sales process and provide your client with the cover they need.
Recognise the principles of TCF (Treating Customers Fairly)
Ensure that in no circumstance are you placing profit before the client, as this is not adhering to the FCA guidelines on Treating Customers Fairly. Instead, ensure your client has every chance to be fully covered, by providing clear access to all policy options that protect them against any chance of future financial detriment.
Make sure your client is completely covered
Although Critical Illness covers your client in the event of many long term illnesses, there are several reasons why Income Protection, Life or better still, a combination of the three could be more beneficial to your client. So tailor the advice you give to suit your client’s circumstances. There are even flexible protection options out there that include care, support and child protection, providing an even more comprehensive package for your client.
As an adviser, you have a tough job competing with comparison sites battling to offer the lowest premiums. But by beginning the conversation with the facts, proving your expertise and showing you are treating them as an individual, your client can walk away knowing they have been given every chance to ensure they are protected in the event of developing and surviving a Critical Illness.
What I love about this industry is the constant changes and challenges we face, often we look back and find our businesses are stronger as a result.
Take the quality metric for example, lenders decide that they were no longer talking about sales volumes but had a whole new agenda about quality. Huge metrics were drawn up for networks with various combinations with which our appointed representative firms would be measured. Some were so complicated it was difficult to interpret them.
Over time they were tweaked and more information was shared with the networks, as a level of trust was built up for the first time with lenders and their fraud and risk departments.
As a result we all know and understand so much more. We are able to recognise information that needs to be challenged from day one. Many cases that may have potentially been a fraud case don’t get through the door and once you know what to look for, it is so much easier to protect your business and deal with the right clients.
However, one of those metrics has always puzzled me – how can networks and brokers improve on the number of cases that go into arrears?
Divorce, death, illness, redundancy and financial hard times are all reasons for falling behind with payments but they are not events that the broker can predict when arranging a mortgage. It is, however, a relevant discussion to have with the customer and therefore providing protection for them plays an important part in the advice process.
However, it may be time for the lender to accept that if they are unable to give the broker any information on cases that are in arrears, including client name, brokers can do no more to cover this aspect.
The lender holds the data and the lender makes the ultimate decision to lend. They currently have little interest as to whether there is a policy in place to protect the client’s income which could prevent arrears in some cases. Maybe it is time for lenders to not only review the metrics but look at addressing the issue of protecting for the future when arrears may not be as low as they are now.