Adequately explaining insurance products to clients is an “unsolvable problem” as they do not understand what it is they are buying, Insurance Compliance head of intermediary consultancy south, David Allison, has argued.
Speaking on a panel at Defaqto’s 2026 Conference yesterday (September 16), Allison explained that, with the exception of car and holiday insurance, it was very difficult to get customers to comprehend the products that are being sold to them.
“The more information you throw at them, the less they read,” he explained.
Allison said the main problem inhibiting customer understanding of insurance products is the way they are regulated, suggesting they should never have been regulated by the Financial Conduct Authority.
This industry has a trust and reputational issue, not because there’s a lack of data or a lack of good intent, but because there’s a small vacuum where consumer opinion and half-truths manifest themselves into stories
“Insurance is not typical financial services. It is the most complicated product in your portfolio.
“It should never have been regulated by the FCA because the dynamics in insurance are so different from investments and pensions,” he stated.
“There are so many nuances that you don’t get in other parts of financial services and we always say that we need to educate the public, but I think it’s a pretty impossible task.
“If you went through everything that could possibly happen, you wouldn’t get through enough sales in the course of a week let alone a day.”
One way to address this, according to Allison, was the use of AI, which he suggested could be used to combat lowered attention spans.
While Allison stated that advisers should certainly try to improve things, identifying AI as a particularly powerful tool, he bemoaned the fact that the basic problem of complexity would always remain.
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However, Defaqto head of retail sales, Ben Randall, disagreed, stating that, while consumer understanding is the biggest challenge the insurance sector faces, it is one that can be solved through use of technology.
“The data exists, the communication technology exists and the ability exists to identify and relate more specifically to an individual, to be able to get the right information to the right individual at the right time in the right medium,” he said.
“It’s about ensuring the customer has enough information to walk away from the purchase feeling like they’ve bought the right product. If you try to frontload it with all the information, they just switch off.
“There has to be a phasing of the delivery of the information that the customer needs during the course of the lifetime of their relationship with the insurer based on what they know about the individual.
“If we can get better at that kind of communication, we can help consumers mitigate their loss in the first place.”
He added that using technology in this way may address another large issue affecting the insurance market at the moment: consumer trust.
“This industry has a trust and reputational issue, not because there’s a lack of data or a lack of good intent, but because there’s a small vacuum where consumer opinion and half-truths manifest themselves into stories that get told to consumers,” he explained.
Randall also stated that these stories can sow the seeds of mistrust with consumers, which drives their behaviour away from listening to and believing insurers.
tom.dunstan@ft.com
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