July 27, 2023
The Supermarket Sweep of Consumer Duty
The price of protection products could fall into the spotlight more than ever as Consumer Duty sweeps closer.
At its basic level, Consumer Duty is all about going back to and reinforcing the basic principles of marketing; that everything starts with a thorough understanding of the customer. Whatever product or service we are offering, Advisers and Insurers need to acquire a deep knowledge of the customer needs and understand what is the problem we are trying to solve?
A protection product solves the financial problems people might face following illness or death by providing an income or lump sum to replace lost salaries and/or to pay off debts or cover commitments. But that deep knowledge of the customer goes beyond “the payout”. It also tells us that most people want products and services that are easy to understand, simple to administer and are transparent when it comes to prices and charges.
Customers don’t like surprises. For example, a product that ends up not covering them for a condition they thought was included. Or a product that ends up costing them more than they expected it would.
The latter “Price Shock” was the trigger that led us to launch UnderwriteMe’s Protection Platform way back in 2012. A time before Consumer Duty, when we were still living in the world of “Treating Customers Fairly” (TCF). Concerns about how the industry quoted the price of protection products and then went onto underwrite applications and potentially disappoint the customer with a price increase, led our founders to ask whether there was a different and fairer approach.
Let’s put it into perspective, imagine going into your local supermarket for your weekly shop. You wander around the aisles to fill your basket and head to the checkout with a pile of groceries. How would you feel if the checkout person, then told you that a quarter of the items, you’d stashed in your basket were incorrectly priced on the shelves and were in fact more expensive due to your personal circumstances? Would you feel like the store had mislead you? Depending on your budget you might have to put some items back.
Whilst this scenario, hopefully, doesn’t happen that often in supermarkets, it was happening routinely in the protection industry a decade ago. Advisers would meet with a customer and then go to one of the industry portals and request a quote. The list of quotes returned by the portal, with the cheapest at the top, would all assume the client was accepted at standard rates. Even if the adviser was aware of a health condition in their client’s history, they wouldn’t be able to use that information to get a more exact price.
Once sent in and underwritten the correct price could come back higher. Still a disappointment for the client even if the adviser had forewarned them of the possibility. A price shock.
We developed UnderwriteMe’s Protection Platform to put an end to these price shocks. Fully underwritten quotes up front give clients more certainty that the price on the quote will be the price they will pay when their policy goes live.
Fast-forward a decade and our approach at UnderwriteMe fits the new principles of Consumer Duty perfectly. Specifically, the FCA were concerned about products and services which aren’t fit for purpose or do not represent fair value. A failure in these two areas can lead to eroded consumer trust and consumer understanding. The key thrust of Consumer Duty is to fix these failures.
We’re protecting advisers from failing to represent fair value by giving them fully underwritten quotes. It makes it easier for advisers to fully explain exactly what effect health and medical evidence has on the price.
And when it comes to deciding whether a product is fit for purpose advisers can assess the quality of the product on Protection Platform at the same time. Continuing with the supermarket analogy, if a customer bought a pot of yoghurt and then later discovered it was chocolate mouse they’d be concerned about the poor packaging or labelling. We’re allowing customers to assess the quality of the product as well as the price before they buy.
Allowing both quality and price assessment in one location is vital as we go into the new era of Consumer Duty. It also gives advisers evidence for their own records too.
We believe the fully underwritten quotes provided by the Protection Platform, together with all the product and information and documentation available provides a solution to the FCA concerns around eroding customer trust and understanding. Indeed, it should mean we can better gain and maintain customer trust in future. No unexpected premium hikes, no unexpected product features, no unnecessary calling around providers to see what’s going on. It instantly shortens your pipeline and gives you the information the customer will need.
When customers get to checkout, they’ll find everything in their basket is correctly priced and the product is as expected.