Monthly expenses can seem never ending, yet faced with the choice of forfeiting our satellite TV subscription or income protection cover, it seems that quite a lot of us would rather forgo the latter.
This point was highlighted in Swiss Re’s Term and Health Watch publication, which came out recently, making for rather bleak reading.
Sales are reportedly down for income protection, critical-illness cover and term insurance. Several reasons are cited for this decline, primarily the cost and the perception by consumers that these products are not necessary.
Anyone working in the industry knows these are not new obstacles. They have been a source of debate for the industry for many years and solutions have been relatively slow in coming. How do you emphasise the need for protection insurance when there are so many other bills to be paid, the majority of which give immediate rewards?
It is unfair to expect that consumers will automatically recognise the value of critical-illness insurance in the same way as they recognise the value of a mobile phone subscription because it is not traditionally a tangible product that we can interact with. What is not debated is whether the need for protection insurance is an important message to convey. It undoubtedly is but it is in need of simplification, explanation and to have a level of tangibility for consumers.
We live in a world which can demand a lot of our disposable incomes and financial services products need to be able to compete with a host of other costs. If we can also make protection insurance products relevant on a daily basis, then their perceived complexity can be simplified through more regular interaction, which also helps to make them easier to comprehend and more tangible.
Consumers need to understand how important these products should be to them and the onus is on the industry to show them.
Take critical-illness products, for example. A lot of work has been undertaken by providers to make the definitions of this product objective. They have also sought to increase the number of conditions covered and to make the payouts directly proportional to the severity of the illness. Traditional products pay out only once but these new products will pay out multiple times, as it is not impossible to get more than one serious illness in a lifetime.
But the bottom line for critical-illness and life insurance products remains the same. You are paying a monthly premium for a product that will only pay out in the event of an illness or fatality. Most consumers do not like to think about the prospects of either and who can blame them? To be paying out monthly for something we hope never to use is not always top of our list of priorities.
But if we are engaging with our protection insurance products every day to keep ourselves fit and healthy, then the emphasis changes. If providers can promote more lifestyle-related protection products where getting or staying fit and healthy is promoted and rewarded, then the relevance and importance of paying a monthly premium becomes clearer. Financial services products cannot remain removed from everyday life, they need to integrate with it.
One way of doing this is through more partnerships with health and lifestyle organisations. Imagine paying your protection insurance premiums and getting discounts on health and leisure activities in the process.
Providers need to adapt their protection propositions to fit in with the current lifestyles of consumers, providing cover that is there when they need it but is relevant even when they do not, because this is the future of the protection industry.
Sammy Rubin is chief executive officer of PruProtect