15th August 2024

Why Value Should Guide Insurance Choices Over Cost

What a strange world we live in.  Consumers spend countless hours selecting the car that they want, looking at the salient features like heated seats, electric wing mirrors, reverse driving cameras and the like.  

They don’t look at a list of car prices and think “ooh, look, a nice new Dacia Sandero for £13,795.”  They peruse, assess, kick a few tyres and make value judgements before shelling out.

How about property.  Do consumers wake up thinking, “yep, I really want a 1 bedroom flat on this rough-looking estate.  Do they decide that a run-down end terrace needing lots of care and attention is their dream property?  Maybe a tent, close to some amenities? No, they shortlist properties based on criteria such as numbers of bedrooms, local school catchments, closeness to railway stations, etc. 

So what happens to these value hunters when it comes to buying insurance?  There is usually a mad rush for the cheapest product – a rush that has turned into a stampede once the internet aggregators joined the party. 

Car and property insurance were the first casualties of this mania and we can see that it has now extended to life and critical illness insurance where brands such as Virgin Money and Smart Life often vie for the title of cheapest product.

This represents an opportunity for advisers because with products such as critical illness and income protection the cheapest product is cheapest for a very good reason – it is inferior to dearer products.

Of course, this does not mean that the dearest is best but, as with cars and houses, you tend to get what you pay for.

Last July saw the introduction of Consumer Duty and this placed an onus on advisers to search out value, assess potential outcomes and document it.  Value is a nebulous concept which is not easily discernible which us why sites such as CIExpert have emerged, providing the tools and insights that enable and document a value decision. 

With critical illness the search for value has been made harder by most insurers offering the choice of a core product or a comprehensive alternative.  Zurich has deconstructed its plan into optional modules and this adds additional confusion for many. 

Ultimately, the adviser has to forsake any urge to rush for the cheapest and assess the market before recommending a plan.  After all, if the cheapest is selected it sends a message to the client that price is the ultimate determinant and that plays into the hands of the aggregator sites.

Alan Lakey, CI Expert
https://ciexpert.uk/

Protection