My last article started with the above graph showing how 2011 new annual protection premiums had fallen to 56 per cent per cent of 2003 levels in real terms. My key message was that distributors need to learn from successful retailers to deliver a single great end-to-end customer buying and owning experience.
I recently attended the launch of the Syndicate’s second report, which provided invaluable consumer behavioral research. The event reminded me that we have many passionate protection advocates with many good ideas, but we also require effective people to make this happen. Otherwise, we are in danger of repeating our messages and everyone switches off.
In Steven Covey’s book “The 7 Habits of Highly Effective People”, his first habit, be proactive, recommends you focus on the things you can directly impact, rather than waste your energy on the things you cannot. He calls this your circle of influence, beyond which is your circle of concern, over which you have no control. Covey points out that effective people focus on the outside edge of the circle of influence, which causes it to expand, and as a result shrinks the circle of concern. This requires targeted and measurable actions.
In protection, our circle of influence is small and possibly shrinking, and we need to urgently focus on expanding the edge of this. This requires the industry to take the initiative. There are five measurable actions we could focus on, each of which will have positive influence on our market and in time shrink our circle of concern. These are: –
- Simplify the selling and buying process
Distributors tell me that selling protection properly is hard work and time consuming. Whilst providers individually may be improving their sales experience, collectively distributors have to familiarise themselves with many different processes and underwriting philosophies. Basing recommendations on familiarity with one company’s process, or “quick quote” price comparisons may fall short of the regulatory standards of ICOBS 5.3. As a result I estimate there are more than 10 steps required to complete an application, once the product need has been identified. This makes selling protection expensive and marginally profitable, in spite of generous commission levels.
We need to make selling protection easier and more profitable by embracing technology in the same way as our colleagues in enhanced annuities, general insurance and other industries. This can deliver a single retailer experience, with accurate customer prices comparisons, allowing advisers more time to spend on selecting the best covers.
Equally, the current complex sales processes have limited the growth of the online market. An individual at a well-known comparison site said: “Life insurance comparison today is an extremely poor experience. It is the only insurance product where customers get quotes that are not real prices. Small wonder we sell any policies at all! There is a huge opportunity for change so that customers get a product that actually works”.
By making protection easier and more profitable to sell and buy we will increase new business and encourage more investment in protection distribution.
- Clear labelling
At Ageas Protect I introduced the concept of product labelling, which was based on the thinking behind food labelling.
Product labelling traffic lights at the front of key facts document shows at a glance whether the cover protects against death, terminal illness, specified serious illness, long-term sickness, total & permanent disability and unemployment. Whilst not perfect, it was to help educate consumers about the needs that the customer has and has not mitigated.
Product labelling also provides advisers with opportunities to develop on-going customer relationships, which can in due course address unmet needs, whilst ensuring customers are not mislead about the scope of their existing covers.
- Annual Benefit Statements
Last year Money Marketing supported my campaign for annual benefit statements. To be effective these need to be simple and consistent across all insurers, in terms of style and terminology. The use of protection product labelling at point of sale and in annual benefit statements could be very powerful. This should extend to group covers.
There may be even more impact if the annual benefit statements could be issued at roughly the same time, as part of a protection awareness campaign.
As part of developing a retail relationship, there is value in the distributor picking up this gauntlet and issuing annual benefit statements that are consistent across their business.
- Published Claims Data
This initiative has been well received by intermediaries and we could still do more. Within the annual benefit statement insurers could publish their claims payment record to inform customers of how many people have benefited in the last 12 months. It would also be valuable to publish the average length of time to make the payment, to show how the quickly the cover can be available.
- An Effective Protection Forum
Twenty years ago CI really took off after six core definitions were standardised. This was led by the National Federation of Independent Financial Advisers, which combined distributors, insurers and reinsurers.
We now have no effective body championing protection across insurers and distributors. F&TRC does very well on operational issues and The Income Protection Taskforce also kicked off the training of advisers in IP, which has been taken over and extended by The Protection Review and PFS. Outside of this there is a strategic vacuum and invariably single insurer issues take precedent over long-term market opportunities.
There is an opportunity for a new joint insurer and distributor body with a genuine mandate to lead on some of these strategic issues, including product labelling (learning from the Ageas experience), annual benefit statements (learning from those companies who do this), as well as to take forward simple life cover and income replacement, both of which have long-term potential. The mandate for this body could either be from the companies, or the ABI and other industry bodies.
In conclusion, we need to determine our circle of influence and identify a handful of measurable and meaningful initiatives. There is much we can do to grow the protection market and build strong distributor and consumer advocacy. With G-day and tax changes behind us, this is the time to invest in the longer-term vision.
Martin Werth is chief executive of UnderwriteMe