We must balance fear and fact in sales

It’s been a busy year for critical illness insurance, what with the CI review being carried out by the ABI working party and the high levels of publicity it is generating about claims that have been declined.

Consumer groups have a new stick to beat the industry with – namely the Financial Services Authority’s Financial Promotions Mortgage and General Insurance Bulletin.

The bulletin covers work the FSA carried out among 25 firms into how well they are meeting disclosure requirements and the way CI and payment protection products are sold. The FSA hasn’t named the 25 firms but we can assume they were a mix of providers and intermediaries.

The bulletin raises the possibility that firms are using scare mongering tactics to sell CI and misleading people on what they can use a CI payout for. The idea of scare mongering comes from the use of statistics about illnesses not covered by CI. There is no denying that scaring people into taking out CI is not right and statistics which relate to illnesses not covered should not be used.

However, insurers and intermediaries do need to inform people about risk to help them understand their financial situation. One of the big barriers to people taking out CI is that they don’t believe a critical illness will strike them. If using relevant statistics helps people know the risks it can’t be bad as it means they will be financially protected if something goes wrong. The balance between scare mongering and informing is key with statistics.

Take health education, for example. It is common to see adverts which show the impact of smoking but these are acceptable in educating people about the risks.

As long as we are sure the statistics we are using would be covered by CI we can be confident in using them in the sales process.

Other comments from the FSA about misleading people about what a CI payout is for seem unfair. Obviously CI isn’t income protection but that doesn’t mean people can’t use their lump sum payout to replace their income. In practice, many people use the money from a CI payout for monthly bills. Providing a lump sum gives people choice – they can do what they want with the money.

As an industry we must be aware of the concerns the FSA has but should not allow these to put us off using relevant facts to inform consumers about the need for protection. When you consider that around half the population have no financial protection, we must do all we can to help them.Nick Kirwan is protection marketing director at Scottish Widows