Swiss Re has urged the industry to raise consumer awareness of the need for protection. In the 10th...
Swiss Re has urged the industry to raise consumer awareness of the need for protection.
In the 10th edition of its insurance report, Protection at any price?, the reinsurer argues that now is the time for the sector to speak up if it wants to see an end to ailing protection sales figures.
The call comes as the report reveals the life assurance protection gap now stands at £2.3trn - £100bn up on the previous year.
Mark Johnson, head of sales and marketing at Swiss Re Life & Health and author of the report, believes the sector's obsession with price has to change if that gap is ever to decrease. "The sector appears largely to be adopting a strategy of competing on price to maintain sales in a declining market," he said. "However, a more holistic approach to promoting the benefits of protection, alongside ensuring the sales process is as simple as possible, are key factors in closing the widening gap."
This is because price competition will have negative effects on risk management, argues Johnson. "Ultimately, repricing leads to a more stringent risk selection process and tougher claims assessments, which form part of the 'price spiral'. This will lead to more customers becoming disillusioned," he said.
The report also looked at the cost of non-disclosure. It showed that the number of term claims declined for non-disclosure increased from 6% in 2001 to 11% in 2004 - a figure that could be reduced, Johnson suggested. Improving consumer education, warning applicants about non-disclosure and striking a balance between appropriate questioning and bulky underwriting processes are key to tackling the problem.
