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Martin Werth: How do we stop protection going wrong?

Who else is worried that new protection business has halved in 8 years? In 2011 new annual premiums were just 73 per cent of their 2003 level – 56 per cent after adjusting for RPI. In addition, the average premium has been shrinking, which means advisers and insurers have to do the same amount of work for less. Not surprisingly this has resulted in insurer exit and consolidation.

What can we do to address this? More of the same doesn’t work. As Einstein said “insanity is doing the same thing over and over again and expecting different results.” The industry is on a downwards trajectory, with companies fixated by price and market share. With a widening protection gap and the need for greater personal responsibility, the industry requires visionary leadership.

Protection is a core necessity and should be considered at every financial services consumer touch point. We must therefore unclog existing channels to market and open new ones. In all of the following areas we need to consider how to switch on:-

  • Wealth advisers and mortgage brokers who avoid protection – this requires process simplicity, a good customer buying experience, low sales opportunity cost, low sales regulatory risk

  • Consumers who want to self-serve – this requires increased consumer awareness, a simple customer journey, choice of insurers and immediacy of buying

  • Brandassurers whose sales have disappointed – this requires credible brand stretch, timely engagement, choice of insurers, simplicity and value

  • Future up-sales – this requires clarity of customer ownership and responsibility, customer awareness of cover gaps, a communications plan and simplicity of process

  • IP to fill vacuum left by PPI – this requires increased consumer awareness, consumer trust, timely engagement, simplicity of sales process

The key themes are sales simplicity, personalised choice, good customer buying experience and effective post-sale engagement. Much of this goes beyond one company and requires the industry to deliver a clear and consistent message.

For advisers the sales process is far from simple. Peter Chadborn’s excellent article Collect data to meet needs identified the many components of an efficient process. He noted customer disillusion if the final terms are significantly higher than the initial premium. His efficient process requires him to email three potential providers with the clients’ specific health situation in order to obtain more accurate terms. Other protection advisers do the same, but usually on the phone and spend between an hour and two depending on their clients’ health. What costs advisers also costs insurers. However, anything less than this, which bases the insurer recommendation on the initial quote, may fall short of best advice should the final terms be loaded. And how do we expect our customers to feel when they’re told they’ve been rated?

To encourage more wealth management advisers to sell protection, they need to be confident that protection won’t strain their established customer relationship and that the sales and regulatory opportunity cost is not too high. Mortgage brokers will also weigh up the opportunity cost. For both we have a long way to go to streamline the pre-app process. For income protection the gap is even larger. By removing the veil of underwriting complexity and perceived insurer prejudices, advisers will have more time to focus on value not price.

All evidence points to consumers doing more research online, but this not converting into online sales. My guesstimate of the market potential is £150m new AP, some of which will replace existing offline new business. The right solution needs both effective emotional engagement and buying simplicity. Customers require confidence they’re buying the right product that will meet their needs without “get-out” from inadvertent non-disclosure, or policy small print. Their benchmark for sales simplicity is buying motor or home from a price comparison site, where they get personalised terms from a choice of insurers with the ability to click and buy. Given that protection is not compulsory, we need to make the customer journey at least as quick and easy. Again in this regard we have a long way to go. And evidence shows that consumers don’t buy the cheapest, but look for value.

Brandassurers understand and are trusted by their customers, yet to-date generally haven’t been successful in protection, even where they have in GI. However, as they widen their access points, to include mortgages and loans, this may present new opportunities. But their customers expect choice, value and a simple sales journey.

The post-sale up-sales opportunities are huge, as most consumers just buy life only. This requires clarity of responsibility and effective communication, which both informs and educates on the scope of existing and ways to affordably bridge essential cover gaps. Invariably advisers and insurers are too transactional and need to rethink their longer term customer engagement strategy. I have argued that those selling long term business should provide annual benefit statements, which are consistent in design and language. That would be a good start.

In summary, we need to step out of our hole and think again. The future is about making what we do easier for customers. We need visionaries, probably from outside our industry. How would Google or Apple respond? How can technology work harder to make the complex simple and the simple interesting? I would implore every CEO to consider whether they’ve done enough. To quote Einstein again “Any intelligent fool can make things bigger and more complex. It takes a touch of genius — and a lot of courage — to move in the opposite direction”. And that’s where the growth will come from.

Martin Werth is managing director of Living Benefits


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Is this just an advert for Underwrte Me?

  2. Andrew Johnson 25th July 2012 at 9:30 am

    For residential mortgage clients, they are mainly concerned with buying their property. However, in the current climate it is safe to assume they have the necessary income, deposit and monthly affordability to do so. With mainly capital & interest mortgages being sold there is no longer a worry about repaying the debt.Therefore their situation is better than it was several years ago. The monthly affordability should be enough to allow some basic protection and to often this is not being discussed or quoted at the point of sale of the mortgage. There is too much reliance on proc fees and broker fees to make up revenue. If a client can’t afford £50-£100 per month for insuring themselves then arguably they shouldn’t be buying a property. Brokers need to allocate time to this area…too often it glossed over at the time of arranging the mortgage and with the promise of clients coming back to do their insurance….the very rarely do.
    Need to go back to old school habits. Clients will take protection if they see the need for it and can afford it. Quite increduously many clients seem to want to protect their TV and Blu-Ray player with contents insurance as a higher priority! This is for brokers to highlight and explain the blurred perception people have. They ALL want insurance….they just dont want to pay too much for it.

  3. Martin,

    LifeQuote fully supports your comments regarding the importance of creating a simple and efficient sales process to help both advisers and their clients during their protection journey. We also agree that managing customer expectations pre-sale in terms of whether a client can actually have the protection benefits they need, and if so, what ratings or exclusions will be applied and ultimately how much the protection solution will cost in reality is vital in instilling confidence in the protection sale.

    To help advisers overcome these issues, LifeQuote has developed a Protection Decision-in-Principle tool. The ‘DiP’ allows advisers to source a fully audited and compliant pre-sale protection Decision-in-Principle from all leading product providers in an average of 3 hours.

    It’s currently available at either as part of the LifeQuote Protection Platform or as a stand alone application.

    Should any adviser wish to have a 3 month free trial of the Decision-in-Principle please email me on

  4. We are in a long running recession – and protection business levels are falling – could be a clue here!

    This is why NEST wont work either – those that it is targetting are cutting back on all but the essentials.

  5. Anon – Protection IS an essential

  6. One of the greatest pressures faced by a busy adviser is the time devoted to research. Many client inquiries have impaired health, such as raised blood pressure and / or cholesterol, a high BMI, diabetes etc and therefore their condition, or combination of conditions could lead to a rated premium being offered.

    Our experience is if the rating isn’t managed, and expectations are not explained at the outset then the NTU rate disproportionately increases, thus wasting everyone’s (the customer’s, the adviser’s, the insurer’s and the GP surgery) time.

    As many of us realise, the cheapest quote offered by the quote engine is not necessarily going to be the best value for the client once the insurer’s underwriting perspective has been taken into account. Indeed we often find No 5, 6 or 7 on the list, could well offer the best value, post underwriting. Therefore we call the underwriting teams for every insurer who has offered a quote to establish what the likely post underwriting terms will be. This inevitably takes a considerable amount of time (up to a couple of hours), therefore if there is a system available which could help reduce research time whilst still providing reliable information it, at least from an adviser’s perspective, seems like a bit of a no-brainer!

  7. David, if you email me your contact details I’ll set you up free access to the LifeQuote Decision-in-Principle hub.

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