2013 is almost over and probably a year best forgotten, with new business forecast to be down 15 per cent (IFA down 5 per cent and bancassurance down almost 40 per cent).
Of note in 2013 average new premiums are expected to fall, in spite of the one-off market change drivers pushing up premiums. Amongst the gloom, one or two insurers have done less badly, reflecting the norm that in a mature market the winners are those with the lowest costs who can offer the most competitive prices.
To use a Vince Cable expression, in 2013 the protection market suffered a major heart attack, after a decade of chest pains.
The patient has survived and is in intensive care, needing strong technology medicine to recover. This includes steroids of a fast, easy and more profitable sales process.
In addition, to get the patient stronger there needs to be a change of lifestyle from transactional sales to customer relationships. It doesn’t need a prophet of doom to foresee that the prognosis of no change will be poor.
The Swiss Re Insurance Report 2013 shows the protection market has significant growth potential, with 42 per cent of adults having life insurance and just 15 per cent with CI and 10 per cent income protection. Reading between the lines, one third of those with life insurance have CI and one quarter have IP.
Life customers are a unique group, as they have overcome the often-sited contra indicators of don’t need it, don’t trust insurers, haven’t got around to it, cant afford it. Yet many have only purchased the most basic protection component and since then may have had lifestyle changes and not reviewed their cover.
A life insurance sale should be the start of an active client relationship that reviews needs and seeks out opportunities to build a more comprehensive protection portfolio. Additional sales could be hugely valuable to advisers, as the first covers the cost of the lead generation and the subsequent, particularly on a level commission basis, could generate recurring revenue.
Whilst this is self-evident, advisers need client centric systems designed to help deepen their customer relationships. We can learn from the investment market and how technology platforms have transformed this sector.
The Money Marketing Wrap & Platform Report identified the highest client and adviser platform benefits being simpler administration, improved client proposition, improved client understanding and satisfaction. What if protection advisers and their clients had the equivalent technology benefits of simpler sales processes, improved service and better outcomes?
New protection technology could place advisers in control of their client experience giving them a single protection gateway and a consolidated customer view. Technology can already provide:
- A single sales process that is easy and fast to use, with a full audit trail,
- An aggregated client view of existing covers, with status updates on cover changes
- Online client dashboard, including adviser tailored consolidated benefit statements
- Analytical tools to identify cover gaps, quantify risk impact and cost of protection
It is also possible for customers to update their personal data to reflect changes in their circumstances. This could include a secure site with their current health status, so that advisers can provide personalised up-sale offers.
Ultimately technology is the enabler for the quality of service and depth of relationship the adviser wants to provide to their clients. For protection specialists this would allow them to secure the first sale and develop on-going relationship designed to suit their individual client profiles. For investment advisers, this extends their client wealth management service to protection. For aggregators, this provides an opportunity for their customers to self-manage their wider protection needs, or be given access to personal advice on more complex covers.
For insurers, this could be a catalyst to stimulate market growth and get off the price treadmill.
In summary, the protection market needs to adapt to survive. 2013 new business is suffering a major trauma, following a decade of declining sales. But with strong technology medicine the prognosis could be really positive.
We need to help our existing customers understand and extend their protection needs, as well as find new customers. Advisers are best placed to do this, and with the right client centric systems can effectively track and respond to their clients’ changing needs, in the same ways as platforms have transformed wealth management.
This would also appeal to wealth advisers wanting to provide a consistent wealth and protection service. Looking forwards, 2014 should be seen as a redefining year, where the gain will have been worth the pain.
Martin Werth is chief executive of Underwriteme