I have a soft spot for Guardian, the (relatively) new protection firm with a two century old name. It has a commitment to “providing fairer, clearer, policies”. So why, in a recent statement to Money Marketing did it resort to 1970s management jargon – and then fail to get it right?
It seems in love with “onboarding”, used several times in the statement including “a period of intense onboarding” and “seamlessly onboard”? My spellcheck does not recognise onboarding.
But Wikipedia does. It means new employees acquiring the necessary knowledge, skills, and behaviours to become effective organisational members.” This is strange as Guardian has sacked some people – the statement does not explain why they can’t be retrained or whether employment laws enable easier dismissals of recent signings.
At least, neither the old nor the replacement Guardian ever sold payment protection insurance (PPI), the two decade plus scandal which turned “protection” and “insurance” into words that had to be handled with the sort of long spoon you would use to sup with the devil. But that does not mean compensation culture has evaporated or that insurers whose businesses have long disappeared are immune to claims.
The PPI saga finally came to an end with the Financial Conduct Authority deadline during the last days of August. Should we give three rousing cheers that a blight on the name of protection and insurance has finally passed into history?
I would only give it two muted cheers. The official finishing of what has been the UK’s biggest financial scandal gives rise to questions which have yet to be answered.
PPI and mis-selling go together like bread and butter, or whisky and water. It was too often sold to people who could never claim on the policy – they were self-employed, unemployed or retired. But even those who could claim were overcharged – it’s estimated that at least 75p in each £1 went straight to the providers’ profit line.
If anyone dared to ask about commission – as was their right – they were told it was just a few percentage points. They were not told about “profit sharing” with companies in the same group. Barclays used Dublin-based companies. Halifax did not even bother going offshore – it “shared” a massive slice of premium income with subsidiary St Andrews Insurance registered in Scotland.
To make matters worse, many were told they could only have a loan or credit card if they took out PPI. Not true, but something to think about for those advocating compulsory protection cover with mortgages. There was no shopping around. In some cases, near compulsory PPI effectively subsidised competitive interest rates.
It would only cost “a few pence a day for peace of mind”. Even if true up to a point, repaying for the mis-selling has cost Britain’s banks and credit card companies £36bn at last count. The final bill will be greater. Add in the £14bn spent on administering the refunds, and you get to £50bn – more than twice the total of all other financial scandals.
The refund cash went mostly into consumption, financing big TVs, carpets, cars and other consumer goods. It’s credited with keeping the economy afloat after the banking crisis in 2007-08. Without those cheques, what will happen as the economy turns down again? It’s a fair bet virtually none of the compensation went into new insurance.
PPI ensured the claims industry mushroomed. Its constant badgering via just about any means it could (whether legal or not) annoyed millions to distraction. But it became a multi-billion business, taking around 30% of many refund cheques.
Closer to home, the question is what will these companies do now their main stream of income is no more? One is to go through policies sold during the seventies, eighties and nineties, which mixed life cover with investments, and often paid eye-watering payments to intermediaries. That could include the old Guardian.
One recent advert in the London Evening Standard headed “compensation notification” was aimed at anyone who bought Merchant Investors and Lincoln Financial Group policies from 1988 to 1998. Thirty year old policies, whether still in force or not, could come back to bite some involved today in financial services.
This may not bring a claims bonanza, but the possibilities of this and other alleged mis-selling are there (or will be created). Claims management is too good a business to let go of. They will find something and protection brokers will not be immune from their attentions. And if they don’t find anything, it’s not unreasonable to suppose the industry will create something – Jonathan Davidson, who supervises retail and authorisations at the FCA, has warned that the finance industry could return to its bad ways if a recession put pressure on income streams.
To mis-quote Guardian, claims managers need to onboard something.
But perhaps the most frightening aspect of all is what PPI has done to popular perceptions of insurance. Before PPI, most consumers had a benign view of protection cover. If well-off, they bought from high street brokers, even solicitors and headmasters (who sold teachers policies back in the seventies). The less well financially endowed bought industrial life – rarely brilliant value but trusted.
PPI destroyed that with its over-priced and small print riddled “peace of mind”, replacing it negativity towards the sector which will only go away with a massive effort. You cannot reasonably expect someone who has been through the lengthy trauma of mis-selling, being told their objection is worthless, persistence and finally that seemingly never-ending wait for a cheque, to become all sweetness and light towards the sector.
A recent (applauded by many) Twitter exchange shows some protection specialists still hankering after scare tactics similar to the banks. Sales lines such as “so you think you will live forever?” or “how will your family fare after you die?” ignore costs and the less than whole of life of much of it. And rarely work.
I wish Guardian the best of luck with its “intense onboarding” and trust “the impressive number of strategic distribution agreements achieved” grows exponentially. Incidentally, can it explain the difference between a strategic agreement and simply signing on the dotted line?