A number of radical protection products are expected to hit the market this year, but will they help encourage more people to buy cover? And what else is needed to bridge the protection gap?
Market views
Peter Le Beau, Le Beau Visage
As someone who spends his life focusing on innovation and trying to encourage companies to view protection through a different lens I can only express delight that new products are coming on to the market and the nettle of innovation has been grasped. However, if you ask me if this alone will bring greater awareness of protection to the market I would have to say no.
Cleverly designed products are likely to catch the eye of specialist intermediaries and if the underwriting of them is less cumbersome, they could be sold direct and in effect to a potentially different audience, although I would usually hope most protection is sold with advice.
If the protection gap is ever going to be bridged it needs to be achieved by a sustained awareness campaign which has the acquiescence of the Government and the media.
It is in the interests of the Government to encourage a culture of self-sufficiency but this Government has such a scatterbrained agenda that I doubt if that has occurred to it. The consumer media also need to understand that while they continue to undermine trust in the industry, confidence among potential buyers will never be established and this is a very serious concern.
For their part, all areas of the industry from intermediaries to providers and reinsurers need to acknowledge the need to pay valid claims quickly, making the buying process less onerous and embrace the spirit of treating customers fairly. Without this, the protection gap will never be closed.
Roger Edwards, Bright Grey
It is a cliche but it is true; protection has to be sold because it is not bought. Most people do not wake up in the morning and realise that today is the day they need to go out and buy critical illness (CI) or income protection (IP) insurance.
Even the people who are open to the idea, perhaps those taking on mortgages, are confused about what is available and often think the benefits of one type of protection meet the same needs as other forms of insurance. Something radical and new could simply add to the list of products that people have to choose from - and if they do not believe there is a need in the first place, would not necessarily stimulate demand.
That said, I believe the industry needs to consider radical new products. We have seen over the last few years that ever-decreasing prices have not grown the market, stimulated demand or helped close the protection gap.
A new product could be an opportunity to break out of this cycle and widen the market to new clients. But what will we get? We hear talk of hybrid CI and IP products and maybe something more complicated. Perhaps what we need is something simpler, with easy-to-understand cover and a clear definition of what is covered and when.
And radical products alone are not enough - we need to work on creating a better overall reputation for the industry. Again, clarity and transparency are key. People have to believe the products they buy are for a purpose and that they will pay out when they promise to.
Linda Tyson, LifeSearch
With an estimated £2.3trn protection gap this is an industry that is calling out for innovation. Radical products entering the market can therefore only be a good thing, if it gives the consumer more choice.
But with little consumer confidence and understanding of financial services, more needs to be done to educate consumers so they are aware of what is available to them, and what their rights are, depending on how they buy.
I also believe regulatory reform is needed to stop companies, including banks and supermarkets, selling what is most profitable rather than what is most suitable, and using their shrewd marketing to make consumers believe that the choice is a simple one.
New products may help, but they need to be sold responsibly, and mass market consumers need to find out that they exist.
As we have seen with the entrance of supermarkets into protection, even though they say they reach customers that would not have otherwise bought protection, overall sales continue to fall, so it is a share of the market that is being fought for rather than growing it.
Providers who pioneer new products in protection should be applauded. With medical science and people's needs evolving all the time it is only right that the products to support these needs change with them.
Mark Johnson, Swiss Re
In 2002, Swiss Re identified a life protection gap of £2trn of sums assured. This has now grown to £2.3trn, while the IP gap has widened over the same period, from £130bn to £170bn of annual benefit.
Putting these huge numbers in perspective, 50% of UK consumers do not have enough life cover or none at all and four times more people think they have IP than actually do.
There are indications that we will see a number of new protection products come to the market this year. Given that product development has been almost non-existent for the last few years, this should be welcomed.
However, will new products help close the protection gap? They will need to balance consumers' pleas for simplicity against intermediaries' requirements for comprehensive cover, something that has been notoriously difficult to achieve to date.
Buying protection does not figure highly on most consumer "must-do" lists. Therefore, apart from introducing new and simpler products, the industry needs to move away from a fixation on price to emphasing the benefits of having cover and make it easier for consumers to buy, using less intrusive and quicker methods of underwriting.
It needs to ensure that genuine claims are paid swiftly and sympathetically as certainty of cover is essential.
The protection market also needs to reduce its dependency on the mortgage market - family protection is a core need that is too often ignored.
