Protection insurance can an animated subject and not just for insurance companies. Advisers and consumers are affected by debates on how the industry should keep up with the changing needs of society, the medical advancements that are gradually making more traditional products redundant, poor customer perception of products and the length of time it takes to activate a policy. While the last decade has seen a reduction in price, perhaps it is unsurprising that it has also seen a decline in sales.
Today, we are seeing earlier diagnoses and better survival rates. However, while we are living longer, this is not to say we are necessarily in a fit and healthy state. It is more likely that we will have multiple, survivable illnesses over the course of our lives. What we need are products which provide continuous, severity-based cover.
Similarly problematic is the fact that it takes an average of 30 days to put critical-illness policies on risk. Coupled with reductions in service delivery on the part of insurers attempting to remain competitive, the industry is arguably failing to provide consumers with the best value for money. Issues surrounding the number of declined claims and the fact that cover ceases upon payout are also hindering the industry from providing the sort of products and services that consumers value.
This is not to say the UK does not have a very well-developed life insurance market because it does. Over the last few years, however, the market has consolidated around a cluster of big brands that essentially compete on little else but price. What is needed are innovative and transparent products which are competitively priced and keep pace with social and medical trends. Solutions need to be found for lowering the number of declined claims and providing continuous cover for all life-changing events through flexible products that appeal to the majority rather than the few. If these solutions can be provided by products with a quicker turn-round time, while providing more support for advisers in the process, so much the better.
What we are starting to see in the market are innovative insurers seeking to address these issues by offering consumer-engaged products. What this means in a nutshell is that the consumer is encouraged to engage with their protection product to maximise the benefits they get from it. For example, by engaging in healthy activities and managing their health, consumers can also manage the cost of their cover. What this does is allow people to extract more value from their policy. After all, you should not have to claim to benefit.
This model has already achieved great success in South Africa where, in 2000, Discovery moved its Vitality concept – a unique scheme designed to encourage and reward policyholders for staying healthy – from its private medical insurance contract into the protection market. Discovery Life now writes over 30 per cent of all new business in the market.
It may seem obvious but what insurers also need to remember is that much of life insurance business in the UK is sold through advisers, so an area of crucial importance for insurers to focus on alongside consumers is the adviser market. Taking the time to understand what brokers need – both before and after the sale – in terms of products, process and support and making sure they understand the nuances of each product and the factors that differentiate it from other products in the market, should be at the forefront of any product developments.
This should be done through presentations and structured training tailored to each product.
What the protection industry needs now are products which reflect today’s needs – products that consumers value and trust and can still benefit from without having to claim. The focus should not be on consumers alone. Brokers need providers to deliver the help, training and support they need to sell products effectively and efficiently.
Sammy Rubin is CEO of PruProtect