'Decline' of face-to-face insurance sales


Insurers are increasingly likely to move away from face-to-face sales through intermediaries in a bid to cut their costs, according to new research.

The six-month review of the UK insurance industry's sales and distribution channels, by consultancy Deloitte, concludes that distribution costs now account for 38 per cent of the sector's total operating costs – up from 29 per cent 20 years ago.

The increase comes despite insurers cutting their operating overheads by half over the last decade as a result of cost-cutting measures such as outsourcing.

Traditional face-to-face sales, normally conducted through an independent financial adviser (IFA), currently account for 72 per cent of retail insurance sales in the UK and almost 90 per cent of sales of complex products such as pensions.

But Deloitte claims that sales of life and pension plans are likely to follow the trend set by more simpler insurance products such as car and travel cover, which are increasingly sold over the telephone and the internet, rather than face-to-face.

Just 39 per cent of sales for personal lines insurance are now conducted face-to-face, down from 84 per cent 15 years ago.

Face-to-face sales of life insurance products have also dropped from 96 per cent in 1994 to 62 per cent today, suggesting that the trend is replicating itself for more complex types of cover, Deloitte said.

Increasing consumer demand for cheaper products and a desire by insurers to cut the cost of commission charged by IFAs for selling their products would see the move away from face-to-face sales continue, the company stressed.

"The decline of face to face distribution has been seen across personal lines insurance as direct channels such as telephone and internet have emerged," said Mark FitzPatrick, head of insurance at Deloitte.

"It is now possible that personal pensions and annuities distribution will follow suit to some extent. The question is not if this will change, but when it will happen and to what extent,” he added.

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