Single-tie life insurance arrangements risk undermining consumer trust and reducing protection take-up, according to new research from LifeSearch.
The specialist protection adviser said its forthcoming Distribution Redefined study found that consumers were 3.5 times more likely to be put off buying life insurance than encouraged to buy if they discovered their bank, building society or retailer only offered products from one insurer.
More than four in 10 consumers, at 42%, said they would trust their bank, building society or retailer less if they found it operated under a single-tie life insurance arrangement. Just 14% said they would not trust the provider less, while 44% were either neutral or did not know.
The issue was slightly more pronounced among building society members, with 45% saying they would trust their provider less under a single-tie model.
THE WALK-AWAY EFFECT
LifeSearch said the trust deficit translated directly into weaker purchase intent. Four in 10 consumers said they would be less likely to buy life insurance from a provider if they discovered it was tied to a single insurer, including 16% who said they would be much less likely to buy.
Only 12% said they would be more likely to buy in those circumstances.
The research also found that 46% of customers of the Big Four banks would be less likely to buy life insurance if their provider was tied to one insurer. The same was true of 42% of building society customers.
LifeSearch said that, for many consumers, walking away from a single-tie provider did not necessarily mean shopping elsewhere, but could instead mean delaying or abandoning protection altogether.
Debbie Kennedy, chief executive officer of LifeSearch, said: “Trust matters. Consumers expect choice, and when it’s missing, trust is lost. Where providers move away from single-tie models and give access to the wider market, trust increases, and so does protection take-up. Our partnership with Yorkshire Building Society shows the commercial impact trust can have.”
LifeSearch has strategic partnerships with Skipton Building Society and Yorkshire Building Society, as well as other firms including Which? and Lloyds Banking Group.
The company said the findings supported its case for broker models that move away from single-tie arrangements and give consumers access to wider market advice.
Tina Hughes, director of savings at Yorkshire Building Society, said: “Trust and choice sit at the heart of our relationship with members. The research clearly shows that consumers expect access to the wider market when they’re making important decisions about protection.
“Partnering with LifeSearch has enabled us to give members access to broader choice and specialist protection expertise, while remaining focused on their best outcomes. Importantly, we do not take any commission from LifeSearch, instead, we pass that saving directly back to members who take out protection policies, ensuring they receive genuine value as well as expert support.
“The impact has been striking – in the first year of the partnership we are protecting more members than before, and around 90% of Yorkshire Building Society customers now receive a viable protection quote when arranging their mortgage, up from around 60% previously. That improvement directly supports our commitment to helping members protect what matters most.”
LifeSearch recently reported that 62% of consumers consider it important to access products from multiple insurers, rather than just one, when seeking life insurance through banks, building societies or high-street retailers.
It also said 69% of consumers would want fair prices supported by comprehensive market comparison when taking out life insurance through those channels.
