The end is not nigh
Well, the main reason to be cheerful is that evolution is much more likely than revolution. The world as we know it will not be completely disappearing as it did for Yell when their dominance of the local business advertising market was crushed by Google. The Yellow pages solution for advertisers became pretty much irrelevant in the digital world.
In the case of protection, the digital age changes many things, but the underlying customer need isn’t likely to be met across the board by any substitute solution, beyond those we’re already used to. Insurers and re-insurers still need to exist to pay out when somebody dies or gets ill. The question is which ones will come out as winners or losers. Incumbent insurers are at risk from new entrants if they stand still. However, even new entrants are arriving based on partnership with existing players.
The main change in the market is in the ways the solution is delivered from start to finish. New entrants may attempt to tackle the many potential elements for improvement as a bundle. But there is plenty of scope for incumbent insurers to make progress piece by piece without completely going back to the drawing board.
The opportunities lie along the whole customer journey. The more improvements can be made from start to finish in a joined up way, the better. But that doesn’t mean everything has to be done at once.
So here are a few areas where technology, new approaches and new partnerships can help.
I’m starting at the end rather than the beginning, because the claim is the core thing that was paid for, and the thing most capable of generating bad PR. Word travels fast and far these days. The public widely believes that insurers don’t want to pay, so processes must be designed to show the opposite. Claims processes have historically been the Cinderella of investment priorities until fairly recently. It seems there are many things that can still be done to make it smoother for claimants, as Roger Edwards’ own personal experience highlighted.
The big one that stands out for me as having the biggest impact, is the need for prompt pay-outs on death. We say “Life cover pays out when you die.” The timeliness implied in this, however, depends on what probate work-rounds are applied by the particular insurer (often involving the “We’ll pay you, but it’s your problem if that’s a mistake” form. Unless of course, it’s a joint first death policy (less often used these days,) or there’s a trustee in place.
But we all know that trusts have very low take up, and dislike their involvement in the process probably as much as our customers do. (We don’t know how many of these actually have a trustee at claim.) But until now, it’s been thought there is no other option than to try and remove some of the pain points by making trusts and trustee appointment “digital”. Even then, insiders expect take up may still be no better than 15%. However, a way of making the beneficiary(ies) part of the policy instead has been found, which can work within the UK probate and tax system, just as well as the many other countries where this solution applies. This much simpler approach should achieve over 95% take up and gives another good reason for useful regular contact. So why wouldn’t we all do it?
We are a stand-out industry for being bottom of the rankings on engaging with our customers, once we’ve achieved the sometimes herculean task of getting them on board in the first place. It’s astonishing that we are still at the stage that it takes a group of protection intermediaries to have to jointly implore insurers to make issuing annual benefit statements a standard practice.
Despite fears of contact prompting lapses, the evidence points to the opposite. Customers welcome some contact with useful information. After all, life changes, and so should cover levels, but who deals with that unless reminded? As traditional routes to increasing business have become more difficult, the untapped opportunity in existing client banks must be huge with more flexible product design, and reasons to keep increases with the same insurer.
This is backed up by the evidence of a specialist provider of protection marketing campaigns for insurers’ existing customers. Significant returns on investment can be made from both improved retention and well above average response rates compared to acquisition marketing.
Uptake can be enhanced further still with a partner providing cross-channel customer activity tracking, to empower your customer support/sales team to maximise actioned responses.
Good reasons to usefully be in touch are:
- To keep beneficiary details up to date
- To ensure cover levels are still enough
- To remind people of the included services they might now need
- Even to remind people they have cover they can now claim on – we’re keen to pay, remember?
Additionally, there is another big reason to be in touch with customers in the newly blossoming underwrite-as-you go/connected cover approach.
Health responsive pricing
Recently launched specialist products make access to cover easier for diabetes sufferers and overweight customers, whilst adding ongoing encouragement towards healthy behaviours through pricing discounts, according to how well health improves/is maintained. Pricing reward reviews are an obvious way to engage with customers in a way that is open to widening out the contact in a variety of ways. The aim can be to again encourage fitness, to review cover levels, make other non-insurance offers or simply to maintain good retention. The high success rate on a wide range of metrics shown by the Vitality model demonstrates the potential from interactions that resonate with customers.
Wearables connected cover
There is growing interest in how data from wearable health trackers can be usefully integrated into protection propositions. Vitality’s success demonstrates wearables are powering some of their outperforming metrics. The difficulty is determining the direct drivers of cause and effect. Is their improving claims experience down to encouraged healthy behaviours or simply selection of the health-motivated, for example? Although it’s still early days for reliable analysis, the inclusion of wearables is, or could be valuable for:
evidence for rewards / pricing reviews
longer term trend identification
early health crisis warning indicators
in future, maybe new business underwriting
The interesting thing here is what extra benefits from this list can be obtained from the next generation of wearables. Higher degrees of accuracy are likely to not only deliver better data, but do a better job of retaining user interest. Combining that with personalised coaching apps, designed around specific purposes, stand to be even more effective. Plug those into a broader health platform suitable for employee wellness schemes, and the benefits are even greater.
Protection as a service
The above demonstrate how protection can move beyond a seemingly cold and distant mechanism for financial compensation if bad luck hits.
The other key method already building strong momentum, is in the provision of additional valuable services to give practical help. For many years this has been available after disaster strikes, but increasingly it is also being offered preventatively. Even underwriting processes can be designed to double as a worthwhile health-screening service to benefit applicants as much as underwriters. The benefits of offering such support services has become so apparent, some insurers have now made them generally available to existing customers at no extra cost.
Whilst interactive tools to aid the discovery and purchasing decision are still in their infancy, and the potential for wearables to drive personalised predictive underwriting is as yet untested, the obvious area in new business crying out to be tackled does seem to be getting some traction. That is, of course, the seemingly massive number of health questions we are now driven to ask by the combination of the race to the bottom on price, and the need to be more specific since rules changes about disclosure.
Twenty years ago, about 12 health related questions would be asked in an application for life cover. Now as many as 40 or even approaching 60 can be found in the initial set put to applicants. Repeat that process for several insurers to discover the best offer, and no wonder people simply get things wrong or are put off.
Buy now quotes
Whilst various shades of shortened underwriting have been developed over the years, these have tended to mean very much higher prices than standard rates. Or sometimes a high degree of cherry-picking has taken only the best lives. But advancing technology and data analysis holds out hope for a more acceptable compromise between these extremes.
It has been a great step forward by UnderwriteMe to take a significant chunk of repetitive effort out of that process. It also helps that portals have begun giving indicative quotes based on weight, height and even waist measurement. The next logical step is to develop a triage model which offers the majority a buy now price on a much shorter question set, with the option to save more by spending more time on the full question set. Synaptic has stepped forward with one version of how this can work, and it makes sense for others to follow. As the propensity to buy on-line grows, this approach looks even more important. In the mean-time, traditional new business powerhouses like mortgage brokers will be only too pleased to find their already long processes being extended less far by the protection element.
If market momentum to a simpler customer experience builds, we could see overall prices going up. For a change, this may not be such a bad thing. It would make it even more possible to compete on convenience and service as much as price, meaning more people getting covered. Furthermore, it looks like time protection prices did track back upwards a little anyway.
Rates per mille have steadily fallen over many years, and competition on price has become ever fiercer in the independent advice market. However, the rate of mortality improvements has radically slowed and may even be reversing. In this case, prices would have to go up anyway, assuming morbidity is following a similar trend.
So at the moment, cover’s never been so cheap, but making it cheaper doesn’t sell more. However, making it more onerous to buy does lose sales and makes it more expensive for distributors to sell. Alternatively, taking cherry picking too far is socially unfair, a bad customer experience for those not picked and against the pooling of risk principle of insurance.
A reversion to broader brush underwriting, facilitated by new technology and data analysis capabilities could be one important factor for breaking out of the stagnation of protection sales seen in recent years.
Everyone pays a bit more, but more people get covered. In the long-run, we could then expect prices to move down again, as the cost of distribution with simpler processes reduces and once initial investments in the early supporting technology are recouped.
The common theme for most of the above is found in partnerships, third party providers and collaboration. Creating greater relevance for more demanding customers is being achieved by going outside the narrow parameters of standard insurance transactions. Partnerships that bring an extra dimension to what insurance can become, look set to bring a new energy to the whole market.
The way we work, who we work with and the services we offer look set to go through significant change in protection. Some will fall by the wayside and new entrants will arrive. But the basic solution of insurance won’t be “disrupted” out of existence. Instead, it is evolving into something more.
Check out our website to see how Insuring Change can help you in evolution.