This week, Celent hosted a London occasion on the UK regulatory subject of Retail Distribution Evaluation (RDR) that will impact the whole life insurance industry. As Jamie Macgregor, pointed out, there are a small over 50 planning weeks till the deadline for implementation.
Matt Browne from the FSA covered important points and intentions of the regulations, and reminded the audience that this is the time to take action, not to debate. The essence of RDR is to fix the retail lengthy term savings and investment market which a lot of take into account is not operating for the mass market consumer.
Jamie Macgregor presented key points from Celent’s recent analysis. Insurers that were interviewed for this paper highlighted that 2012 will be a “horrible year” with the barrage of regulatory deadlines such as Solvency II, EU gender directive and RDR whilst continuing to focus on new propositions for growth and profitability. The level of adjust and effort in Q2 and Q3 will be massive. Even with the delay in Solvency II regulations, several organisations are still committed to the exact same level of project effort to meet the revised deadline.
It is Celent’s view that the biggest risk facing product providers is about orchestrating the end-to-end delivery of the change program across numerous partners both upstream and downstream. This danger is then produced worse by dependency on outsourced relationships within product providers and the visibility of their readiness. Effective communication across all parties involved will be a vital achievement element of several programmes.
Martin McKenna from Focus solutions presented a view from a distribution perspective. He noted that IFAs had originally seen the regulation as a threat but that there was a shift in views. IFAs are beginning to see this as an chance to de-risk the business model. It is clear that IFAs do not have the capacity to serve HNW, the mass affluent and the mass market . IFAs will refocus their businesses towards what they see as high value customers and this could result in orphaned clients . This is a fantastic likelihood for new players to enter the marketplace, especially those with robust brands. New distribution opportunities turn into accessible like online only, retail outlets , and mobile. Martin went on to note that whilst the appetite for assistance will still be there, shoppers will want to choose firms they know and trust. This creates a space for bigger brands like banks and insurers to provide merchandise directly to the consumer. His view was that the winners would be those organizations who could understand the cost of servicing the client, and who had the scale and brand to respond to the marketplace opportunities.
Kevin Okell from Altus discussed the view of the item provider. Kevin noted that RDR was considerably a lot more than just switching off commissions. Rather, it meant and required a modify in the provider operating model. In the new RDR world, advice and a item transaction are two distinct, and potentially unrelated, entities. The guidelines that allow providers to facilitate the payment of suggestions in between customer and adviser only adds to the complexity of the processes and supporting systems that should be changed. Ultimately, the expense associated with this complexity requirements to be covered from somewhere, and it is likely that the consumer will end up paying by means of elevated product administration charges.
And so with the views from the FSA, Celent, IFA and provider, the delegates left with a lot to believe about. Celent will continue to monitor and write on this topic as we count down to 31st December 2012 .