Financial advisers selling insurance are beginning to explore in more detail the connection between scope of service, the service delivered at the outset, and the review. The subject came up during one of the panel sessions at the recent IFA conference, but it has also been raised at presentations with the FMA, and in other meetings too.
Most advisers know that the days of blanket statements like "I find the best insurance solution" are gone. Almost every service has limitations and those must be explained to the client in order to avoid misleading them. So advisers are using the scope of service definition to cover issues such as which companies products will be included or excluded, and then defining how they will arrive at their recommendation.
Now consider the scope of the review. Some general insurance advisers, with larger accounts, will 'take them to the market' every year: effectively re-writing the cover to find the best available terms and price from the set of companies with which they work. Because of the longer-term nature of life, disability, and health risks, that is rarely possible, and even if it were there are some significant costs and risks with moving cover every year. For trauma products it would leave most clients without cover - as for many conditions there is a six-month stand-down period from the date a policy starts to when a claim can be accepted. So we need to define a different form of review. Some suggestions from the discussions I have had with advisers are:
- Alternate years - review only every two years
- Split reasons for review: we review immediately if there is a change in client circumstances, but we only review the product every 'x' years in the absence of a change in client circumstances
- Define 'mini' review which are about cover levels and options, and 'major' reviews which are about products
- Performance-driven reviews - if a product falls out of our recommended list because it is now more than 'x%' below the a benchmark for product then that triggers a review for all those clients
I am sure other approaches can also be designed, and that the approaches should vary depending on the type of the client and the service offer being made by the adviser.