Recent research into consumer attitudes still shows an amount of self-deception, finds Kirsteen Grant.
Choosing a provider
One trend that emerged in the research was the tendency of consumers to put less emphasis on the importance of the financial stability and reputation of a provider, instead favouring price and product features and benefits (see chart, below).
Providers also need to be aware that potential customers are increasingly relying on a combination of online advice and are likely to seek far more validation for their purchase decisions.
The confidence to make a decision is not a barrier for consumers. Information to seek out product recommendations will, however, be sourced from a wide variety of channels including family, friends, professional and independent bodies.
To understand the influence of social media and its impact on consumers, people were asked a range of statements about how they review and use social media.
‘I tend to read people’s feedback and experiences of financial service providers and products on social media sites (such as Twitter and Facebook) when looking to get products like current accounts, insurance, mortgages’. This has increased from 2012, particularly for 18- to 34-year-olds, where one-quarter now read people’s feedback, reflecting the changing social media landscape.
They were then asked whether ‘Reading up on financial products online is an important part of a buying process for me’. We found over one-quarter have the confidence to independently research products.
The industry will need to adapt to these new demands. Creating a positive buzz around products is a key challenge for protection providers and one that needs to be tackled successfully.
When looking at how long ago it was since respondents last bought a protection policy, about one-fifth had done so in the past 12 months. Although for all products the most likely scenario was that they bought them at least five years ago.
A quarter are now buying online (nearly one-third for life and critical illness sales), which indicates that purchasing online is now moving to become a significant distribution channel for protection.
When asked ‘How much would you expect to be charged for financial advice when buying health and life protection insurance (such as life insurance, critical illness and income protection)’. The average amount stated was £102. But nearly one-third would pay up to only £50. Overall, one-third expected to pay nothing (the highest scoring answer).
What would help consumers to buy?
Consumers expect a clear, transparent and simple route to purchase. The protection insurance industry needs to use all opportunities available from new technologies to fulfil these expectations.
For a second year running, the top three features that consumers believe would help them buy protection insurance were:
• A clearer understanding of what the policy covers and does not cover (this ties in with the importance of product features and benefits when choosing a provider);
• Easy to understand product and company information without any jargon;
• The ability to compare quotes from different product providers.
The journey must be straightforward and consistent to keep consumers engaged and on the right path. The industry needs to consider how consumers want to buy and how we can best facilitate this.
Kirsteen Grant is marketing manager at Hannover Re UK Life Branch