The specialist General Insurance provider surveyed 2,000 mortgage brokers and found that this trend was causing worry among the broker community, with one third of brokers saying the internet, direct sales and a preference among consumers to choose on price were the biggest threats to their businesses this year.
Kevin Paterson, sales and marketing director at Assurant Intermediary, said: "It is encouraging to see that brokers stand by the quality of an insurance policy and view quality as far more important a consideration than price, despite consumers' continued pressure to shop purely on price alone.
"It is only at the point of claim that customers who buy solely on price without ensuring that the policy gives them the level of cover they're looking for realise their mistake."
Ian Smart, head of product development and technical support at protection specialist Bright Grey, said that often though advisers say they value the quality of the product they will still sell on price, because they’re failing to explain the full reasons behind the extra cost of a more expensive product.
When push comes to shove
He said: “When push comes to shove, advisers will sell the cheapest product, and they’re shooting themselves in the foot. The real value the adviser brings is offering the best product, best suited to the customer. The simpler cover on offer doesn’t always offer the bells and whistles many customers need.”
Paterson added: “Brokers and the financial services industry can help consumers learn more about the quality of their policy, but we face an uphill struggle.
"The rise of aggregators has meant that the gap in perception between what an insurer believes is a fair price, and what the consumer is willing to pay has widened."
Smart agreed that the rise of comparison websites were an issue for advisers but said that those really appealed to consumers who would not have considered using an adviser in the first place.
He said the real worry for brokers was likely to be based on customers who came to them for advice and then subsequently sourced a similar product online from the same provider.
He said: “This is a danger for brokers, but it comes back to advisers explaining the value they add properly to the consumer.
"If the customer does source a cheaper product online they’re often getting different and more basic cover.
"Brokers must ensure that their clients understand that.”
Regulation and the RDR
Regulation and the Retail Distribution Review were also causes for concern for brokers, and just shy of a third of survey respondents also said recession and the poor state of the mortgage market were major threats to business stability in 2010.
Smart said the incoming RDR was going to cause problems for advisers who were selling investments, pensions and protection, because the fee structure would be different across the board.
He added: “The RDR will confuse the issue with clients because they’ll have to pay an upfront fee on investment advice, but the majority of people will still prefer to pay their protection advice fee through commission rather than upfront, because it seems cheaper.
"Customers will more likely accept commission in the form of an extra pound or two on the monthly premium than a bill for several hundred pounds.
"That will be a challenge and could put some advisers off selling protection because of the difficult conversation that it will be necessary to have with a client around adviser remuneration.”
