Advisers should avoid the mistakes of general insurance and offer new ways for consumers to buy protection, writes Neil McCarthy, director of Direct Life.
In 1989, Churchill Insurance was among the first to air TV adverts for direct insurance. Competitors soon followed, and a revolution in the way personal lines insurance was purchased was born, changing forever the relationship between customer, intermediary and provider.
The advertising portrayed the broker as adding additional cost with no discernible benefit and created an enduring association between unnecessary ‘advice' and expense.
If direct purchasing was the start of the revolution, then the evolution of aggregators cemented the change in buying behaviour forever. Aggregators have similarly impacted on the travel market and are increasingly moving into many other retail and corporate products, from utilities to general products and services.
However, my observation when visiting advisers is that some don't fully appreciate the impact that the move online creates among customers. While many advisers recognise the move towards the internet, too few still keep pace with the motivations and reflexes of a new, tablet-literate society.
There is also a perception gap, with many assuming the revolution is driven by the young, whereas it also now extends to pensioners using iPads to keep in touch with their grandchildren.
At this juncture it is important to stress that advice is essential, and will continue to be so for many individuals and products. But, equally important is accommodating your clients' and prospects' evolving buying behaviour and not losing them to a different channel, as many general insurance brokers did.
While most shrugged their shoulders at the time when they lost a few tens of pounds of commission from motor policies, many are now rueing the day as their clients now choose, having made the move, to use the aggregators for their commercial lines policies.
We must also accept that when buying online we all make mistakes, we are not product experts, we won't always make the most informed judgements when comparing products, and we almost certainly don't read the small print - but we still buy online.
This is why we are advocating that advisers should try to offer their own sales channels that suit both a non-advised panel solution and an advised service.
We have supported mainstream aggregators and brokers' own panel solutions for many years and therefore we wanted to share some of our experience that may benefit readers.
The evolution that is auto-enrolment will change behaviour. For many this is the first financial product that they will own, and it's being taken seriously.
Most are supported by online solutions. And once a consumer has one financial services product, they may be less wary about buying another.
Advisers can create similar buying experiences with easy to understand products like level term, decreasing term and whole life products if signposted clearly. Similarly, critical illness can also be explained, and easily purchased on line.
Importantly, those customers that don't understand haven't lost contact with their adviser - within all the adviser-hosted sites there is always the opportunity to signpost your client back to advice if they are unsure or have complicated circumstances.
Explaining carefully what happens at each stage and making the journey as simple as possible is essential. Behind the scenes, people like us are seeking to optimise the journey to make it as easy and quick as possible to get the client on risk.
All this technology can easily be added to an adviser's website to give them another distribution channel if they think it appropriate.
For a self motivated purchaser, or someone introduced to that journey, making the decision to buy a product, has in our experience a better persistency. Completion rates improve as the journey becomes less complicated.
Typically we are seeing products being purchased by individuals in their late 30s, with simple protection products being the most common purchase.
Working with Aviva we have introduced a product that consumers can buy immediately from the comparison screen without the need to complete any further application forms, giving the customer immediate cover.
This enhanced process within a comparison site gives a customer the surety of price, and the speed of completion that they would expect from their normal on line purchases.
At the moment this facility caters for healthy standard lives by asking some simple filter questions in the quote stage. As we develop this concept we would anticipate the number of providers who can offer this solution to increase.
With technology improving, our protection platform for advisers, LifeQuote, is urging advisers to adopt their own branded solutions. This will give them the capability to distribute life products in what may be a new channel to the adviser, but one that is expected by many of their clients.
Furthermore, for advisers, it can reduce overheads and create a different service proposition to support their traditional sales channels.
As consumers change behaviours, it seems to me obvious to try to reflect how your customers want, or may want in the future to buy certain products and services through traditional intermediaries.
The key is not to lose your client to another channel that's not under your control; once lost, they will be very difficult to recapture.
Launching later in 2019
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Research from Canada Life
Putting the tech into protection