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A tonic for protection

Protection must keep pace with medical advances and convince the public that they need the product

The changes in medicine in our lifetimes have been startling. There are predictions that a cure for Alzheimer’s could be available within the next few years.

A vaccine known as CAD106 is being developed by Zurich-based firm Cytos which is also looking at anti-smoking, obesity and flu vaccines. It could stop Alzheimer’s in its tracks if it is successfully developed.

We have seen other such medical advances in recent years – survival rates for heart disease, prostate cancer and breast cancer, for example, have significantly improved.

These medical advances have an enormous impact on the protection industry, which is constantly changing and adapting its processes and products to keep pace with changes in the way that we live today.

Of course, it is not just the protection industry which is experiencing these changes. Across the financial services industry, other sectors are facing similar challenges. Colleagues working in pensions might be forgiven for wondering what the protection industry is so worried about and what is so unique.

In the pension market, they are grappling with increased longevity – the average 65-year-old man can now expect to live to 82 and many might live a lot longer and their retirement savings have to be able to adapt to that reality.

Similarly, there is massive structural change with the switch from final-salary schemes to money-purchase schemes. And, of course, there is the stockmarket. Imagine having to base your business plans on that.

The lesson for the protection industry is that we need to communicate to consumers that we are relevant to their lives and that we are adapting to the changes in society and the progress being made in the field of medicine.

People will read about miracle cures and medical advances and wonder why they should bother having protection. If Alzheimer’s is going to be cured, then surely one need not worry about investing in protec-tion products?

Protection is not bought, it is sold. Consumers need to be convinced that they need protection and that means making the product relevant and flexible.

Medical advances and increased longevity mean that we are living longer and relatively healthier lives. However, it is not always going to be the case for everyone that a long life will be a healthy one. We may have to get used to the concept of the “living sick” – people who are indeed living longer lives but who are not necessarily healthy.

In these situations, protection needs to be about living rather than dying and we need to adapt our products accordingly. Customers will not necessarily need a payout for dependents in the form of a life insurance policy but a payout for themselves in the form of income protec-tion or critical-illness policies.

The challenge for the industry is to offer products that adapt to this new reality. and we have the capacity and skills to do so.

But how do insurers communicate to advisers that protection products are evolving to keep up with medical advances? Providers ought to be helping to fill the advice gap by offering help to advisers to ensure that they can explain the ins and outs of critical-illness policies effectively. Increased training on protection products, email updates and information packs are all helpful.

We can drive forward improvements in our industry and many providers and advisers can claim significant successes. We certainly need to work as hard as possible to ensure that the market continues to evolve and make progress.

We need to re-engage with consumers by offering transparent products that are relevant to their lives and explaining what our products will and will not deliver.

Customers want products that are, in the jargon, continuous and proportionate or, in plain speak, as people are living longer, we need products that pay out more claims more often.

The best way forward for all of us – customers, IFAs and providers – is to develop products which pay out when they are needed.

Angus Maciver is insurance business director at Prudential


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