Statistics can be, and often are, misread or manipulated, leaving most people none the wiser as to the real cause of a particular effect.
Take the famous ‘tin hat’ data collected during the First World War, when head injuries to soldiers, who had previously only worn cloth hats as protection, increased markedly when they were issued with tin hats.
Though this made little sense, few could explain it until somebody pointed out that the earlier records only accounted for injuries, not fatalities. Once everyone donned metal, the number of fatalities dropped, but the number of injuries went up because the tin was saving their lives. Mark Twain was right.
You may have seen a report on IFAonline.co.uk this week detailing the latest product persistency data collected by the FSA. The figures suggested that consumers are less likely to lapse on some life and pensions products – though not personal pensions, I should point out – if they were sold to them by an IFA, rather than a tied representative. The FSA listed several reasons why this might be the case, though its list was far from exhaustive.
The FSA: statto
The potential problem for advisers is that the regulator, which has been collecting data on product persistency for almost a decade, believes lapse rates may be indicative of the quality of advice given on the product. But should it?
Though it pointed out there are many reasons for consumers to lapse on a policy, such as poor product performance, the FSA made no mention of several other, potentially decisive, factors.
For example, in the future, will the FSA take into account the fact that, with advisers able to achieve cheaper options for women on income protection following ‘G-Day’, a spike in lapses might be expected?
Will it also take into account the continuing economic factors, which might force people to switch off cover because they do not believe they can continue to make payments?
It is a dangerous thing to place too much stock in a few sales figures. Let us hope the FSA realises this.
Editor, Professional Adviser and IFAonline.co.uk
Proposals outlined at Labour Party conference
Finance industry working to stop fraud
Partner Insight: Cathi Harrison, director of para-sols and Apricity and Clare Farrell managing director at Northfield Wealth met in London recently to discuss how to stay on top of regulatory risk.
CEO labels whistle-blower as 'brave'
Adds up to £130m FUM