Bringing protection within the pensions dashboard would be good for both consumers and the industry, with technology acting as the crucial enabler for group risk providers to keep their members informed, says F&TRC director Ian McKenna
A dashboard for retirement saving is rightly deemed crucial to increasing consumers’ engagement with their pensions.
With so many issues to consider, the dashboard looks certain to spark debate in a number of key areas, not least because of the impact it will have on different businesses in different ways.
One hotly debated issue is likely to be if this will be purely a pensions dashboard or a savings and investment dashboard covering all areas of an individual’s medium- and long-term saving.
Although not the original inspiration for the concept, the importance of delivering a dashboard capability was highlighted as a crucial outcome in the FAMR report, with the objective to deliver it by 2019.
Sadly, one crucial area of financial planning that looks certain to fall outside the scope, at least of the initial dashboard, is protection. I am convinced that what consumers really need is not a pensions or savings dashboard but a personal finance dashboard that helps them take better control of all aspects of their finances. I am fairly confident that is what we will end up with in the longer term, with consumers able to view all their finances in a joined-up way.
Regrettably, for more than a decade group risk has increasingly been a closed shop, in which modernisation and better customer outcomes seem to have been held back.
Although well intentioned, Grid has served as an effective route to constrict innovation, ensuring progress is at the pace of the slowest with the result that consumers have been denied access to information.
Take, for example, the publication of group risk claim stats. For many years, providers in the individual protection market have published their own data. Only in the group risk market was it deemed inappropriate for companies to publish their individual claims stats.
You don’t have to be a rocket scientist to realise that this enables some companies to hide their poor claims performance among industry averages. Clearly, not all providers agreed with the accepted view because several did publish their own data and, significantly, those that did seemed to be paying a higher percentage of claims than the published averages.
While the group risk market has achieved some growth in recent years, given the in-built pricing advantage it achieves by paying far less in commission, should it have achieved more?
Technology has been conspicuously absent from the sector. A couple of providers have made brave efforts to change things but the situation has not changed radically.
The protection market generally has been poor at providing regular information to existing customers on how much life cover they have. Only a handful of life companies regularly produce individual protection statements despite strong demand from the adviser community. Industry standards body Origo wrote standards for providing such information online over a decade ago, but so few insurers have implemented them that they are still not formally adopted.
More than 12 million UK consumers have advisers or are members of workplace schemes that can offer them real-time valuations of investment policies on a daily basis via their smartphones, tablets and other online devices. This is slightly more than the number of people covered by group risk policies.
Such technology is essentially what is needed to provide a personal finance dashboard. It should represent an enormous opportunity for group risk providers to give clear and concise information to scheme members to help them better understand the value of the cover and benefits they have.
How many providers in the group risk market have the ability to capitalise on this? By failing to do so, they are doing a disservice to everyone.
Pension dashboards are going to happen; it is just a matter of how and when. This could and should be a huge boost for the group risk market but it needs to end its isolationism and embrace working with the wider personal finance community if it is to achieve the best for customers.