It is during hard times that people need protection the most but persuading them to part with their cash may be difficult. Roger Edwards offers some marketing advice
Despite the credit crunch, UK living standards have never been higher. We earn more than in the past, have access to cheap but reliable technology to make our lives easier, and can afford far flung holidays, entertainment and more consumer goods. But now things are getting tougher. The cost of living is rising at record levels and people are beginning to feel the pinch. And while they may be looking for ways to save money the current squeeze is also prompting people to sit up and have a really good look at their lifestyles, and the salaries, savings and loans that support them.
This could present an excellent opportunity for the adviser at a time when mortgage business is drying up.
If people are concerned about making ends meet when they are healthy and earning salaries, they should be receptive to a conversation about what they would do if their income stopped. While protection is always a benefit that has to be sold, economic conditions are such that now is a good time to target existing customers and encourage them to consider their income protection (IP) needs. So maybe now is the time for advisers to start thinking about an IP campaign. But what aspects need to be considered to help target IP business?
For many years IP has been thought of as a 'Cinderella product'. Although the need it meets is quite obvious, it has never really been as successful as it should be. It has often lost out to critical illness cover, even though the two products are complementary rather than alternatives. But Cinderella will go to the ball if providers make it the focus of a campaign and overcome some of the perceptions customers - and advisers - have about the product.
A Clearer picture
There are often perceptions that IP is too complex, riddled with tricky definitions and fiendish exclusions; has difficult underwriting and a nightmarish claims process. But the truth is that over the last few years providers have become increasingly innovative in electronic and telephone underwriting, making the whole process easier. Again, over the last few years the industry has seen great improvement in the clarity surrounding the definitions and exclusions. These are easier for the customer to understand and should mean less of a problem at claims stage.
Stage one in an IP campaign is to identify potential clients - trawling through databases and identifying people who have taken out mortgage protection within the last five years. It is highly likely that they did not take out any additional cover at the time.
Stage two is to send a mail shot, either self-written or prepared by a provider and to post this out to the minimum number of clients who can comfortably be followed up with a phone call a few days later. This is a key consideration as there is no point sending out hundreds or thousands of mailers if it is only possible to follow up 50 in the following days. Keeping the mail shot to a manageable size will increase the chances of success.
A huge mail shot with no follow up may result in a response rate of less than half of 1%. A smaller mail shot with a rapid follow up might result in 25% of those targeted agreeing to a meeting. It is a good idea to send the mailing out on a Friday so the client gets it on a Saturday morning when they are less likely to be rushing around getting ready for work or packing the children off to school.
Then stage three is the follow up call the week after and this is where the message needs to be convincing and well rehearsed because it will sow the seeds for a more detailed discussion in a face-to-face meeting.
Bringing it home
It could be something along these lines: "In credit crunch Britain more people are finding it harder to make ends meet and as debt increases we are more than ever balanced on a precipice of potential financial ruin. If your ability to earn an income to meet your debt repayments, keep the family fed, and retain the lifestyle to which you have become accustomed, were removed for whatever reason, then many people would be in serious financial trouble.
"Could this situation apply to you? Can we make an appointment to talk about setting up a financial safety net to protect your lifestyle?"
Stage four is then the face-to-face meeting. People respond well to stories and case studies. One way of bringing it all to life would be to ask the client to create a mental image of the most important elements of their lifestyles. They could think about their photo albums and pick out the 10 photos that best sum them up. What would they choose? Perhaps a picture of themselves, one of the children, their modern four bed roomed detached house? They may select a shot of a view from a hotel bedroom window in Tuscany.
The adviser should then explore with the client how this is funded. Like most people, unless they are lucky enough to have some savings, it will be their salary and their loans meaning mortgage and credit cards are the financial foundation of their lifestyle. It is highly likely that they have had similar thoughts particularly as the credit crunch is rarely out of the newspapers and is constantly discussed on television.
The client should then consider what would happen if their salary stopped. This could be because of an illness or an accident. What would happen to their life style as a result?
Go back to their 10 photos. What elements of their lifestyle would they have to sacrifice if this happened? Would they have to stop taking holidays? Could they pay the mortgage? Would their home be at risk of repossession? How many photos would be left out of your original 10 if their salary halved or disappeared entirely?
Another way of looking at it is to consider what their salary provides each month by using their bank statement to list all the outgoings, bills and living expenses. What would they have to sacrifice if they had a lower income? Say they currently earn £30,000 a year, what would they have to strike off the list if that fell to £15,000? What would they be able to afford if all they had was the £60 or so a week that the State pays in incapacity benefit?
Stage five is of course to introduce the solution, an insurance product that can provide a financial safety net. It is called IP and it can replace the client's income if they cannot work due to sickness or accident. Insurance is never very interesting, and people can always think of a million things that they would rather spend their money on. But the plain truth is they would not have much money to spend if they stopped earning. And this simple fact of life is at the forefront of people's minds perhaps more than ever before.
A valuable investment
Undoubtedly there will be objections to the cost of cover especially during an economic downturn but IP does not cost as much as people think. And while it cannot be hung on the wall and admired like a painting or be a source of entertainment like a trip to the theatre, it could in the future mean the difference between being able to continue to buy paintings and enjoy nights out, and wondering how to make ends meet on a low monthly pay out from the State.
Thanks to the constant media attention on the credit crunch there is no end of suggestions as to how people can free up a little cash by being clever with their spending. Taking annual subscriptions rather than buying magazines monthly, dropping down from expensive food brands to supermarket's own brands are two of hundreds of suggestions to be found in newspapers, magazines and on television.
The need for IP is definitely here. The product is easier to understand and thanks to technology, easier to apply for. People will buy it if they are targeted and the industry paints the right pictures. There have been many cliched suggestions in the past that the 'Cinderella product' will finally get to go to the ball. The fact is that with a little hard work and a good campaign to existing customers this is probably the best chance it has ever had of getting there.
Roger Edwards is proposition director of Bright Grey.
