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The Actuary The magazine of the Institute & Faculty of Actuaries

Reliance on independent financial advisors plummets

There has been a 36% decline in the number of UK consumers using independent financial advisors (IFAs) and mortgage providers when buying life insurance over the last six years.

Less reliance on financial advisors ©Shutterstock

That is according to the findings of a new survey from Direct Line, which reveals the amount of people purchasing insurance direct has doubled sine 2011, with 29% now preferring to make decisions independently.

Of those that buy life insurance directly, 37% say trust in the brand is a leading factor in their decision, 35% do so because it is the least expensive option, while 28% feel terms and conditions are set out in a clear and transparent way.

“Our survey results show a clear downward trend in the use of IFAs and mortgage providers when it comes to buying life insurance, but we certainly won’t see them fade out completely,” Direct Line spokesman, Trevor Bush, said.

“Some people still buy their life insurance cover from their bank, building society or from a financial advisor. And for those with complex needs this may remain the most appropriate way to meet their insurance demands.”

The survey involved 1,600 insured and non-insured respondents aged 25-55, finding that 23% of those with life insurance use IFAs and/or mortgage providers mainly for convenience and trust.

Although it was found that price comparisons sites are now the number one informational resource people use when researching life insurance, only 11% of consumers actually buy a policy through such sites.

Going through an insurance company online or over the phone is the second most used tool, while a consumer advice site is third most popular method.

The findings also show that nearly a quarter of those insured made a provider shortlist before buying, while 86% took up to a month before buying a policy after they started their research.

It was also found that there is a decision hierarchy that consumers use to rank providers, with the most important considerations in descending order shown below:

1) If insurer can meet their coverage needs
2) Trust
3) Budget compared to cover
4) Healthy living rewards
5) Payout rate
6) Services
7) Financial incentives

Direct Line head of life insurance, Pritpal Powar, said the clear shift towards buying life insurance online reflects peoples desire for convenience, while also enabling people to switch to the telephone later if they prefer, adding: “The choice is yours."

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