Swiss Re's Term & Health Watch report 2008 issued a stark warning to the protection industry to update income protection. What do you think should be done?
- Andy Couchman, Bank House Communications
IP traces its roots back to the late 19th century's Victorian social reform movement and the product has undergone little change since then. There are two issues to address with the cover.
Firstly, IP needs to better meet consumer requirements. This means practical 'soft' benefits and unemployment cover. It also means finding out what is needed rather than what is wanted. This can be difficult because people do not know what protection insurance is available - their horizons are limited by what is familiar - perhaps ours are too?
The other issue is low confidence in the product. We are in a Catch-22 situation because those who sell IP regularly find it straightforward and rewarding. Advisers need support, motivation and information.
To be able to progress requires a breakout from current industry thinking but there is no single or simple solution. The IP Task Force is leading the way but we need to learn to embrace innovation more.
Our Victorian forebears had a vision and maybe this is lacking today. Potentially IP can support and enhance what the State offers and deliver added real-world advantage to customers at value prices. However the work involved in getting there should not be underestimated. Perhaps the issue is whether we are committed enough to make it happen.
- Andrew Francis, Munich Re
There is great potential to innovate IP in general as well as some other areas where sales can be increased in the short term. The industry must stop sending out negative messages that IP is a hard sell as this creates a self-fulfilling prophecy. It should focus on the areas that make IP a desirable customer proposition and use marketing capital to send positive messages. IP is a great product that meets a genuine customer need and with a little effort to sell it, the industry could achieve the results it desires.
Today's society is very much about instant gratification, so what does IP satisfy? It may be softer elements such as peace of mind and security. The insurance product, which is all about delayed gratification, is a part of the overall service to the customer and many other services such as rehabilitation come into their own.
A lot can be learnt from life and critical illness (CI) to improve the IP application process and quickly get customers on risk. The underlying conservatism in underwriting and actuarial pricing fraternities needs to be challenged. The process should collect less medical evidence and be quicker while retaining business quality. This can be achieved through tele-underwriting and interviewing and generally being more creative. Support and training should be offered to make IP sales an attractive alternative to a CI ones for intermediaries.
- Peter Hamilton, Zurich
The problem is as much about process as product - we need to ease the first while retaining benefits of the second. Confidence and cost for customer and adviser are critical.
Customers want to know their plan meets a clearly defined need. Better communication at point-of-sale and afterwards would help to reinforce benefits and ensure the cover remains relevant.
The industry not taking up rates is probably between 30% to 40%, a waste of time and resources for all, not least the consumer. If we can reduce this, advisers will have improved confidence and cost.
Training may not be seen as innovative but it is important alongside a better use of technology. A key factor behind the protection gap is the fall in protection advisers.
Customers too frequently receive a quotation on one basis only to find they are asked to pay significantly more when their actual occupation is known. An industry standard occupational database would significantly improve the chances of the right premium being quoted at the outset.
Innovation for IP needs an element of industry collaboration (common occupation definitions would be a good start), process improvements (bringing us closer to the ease with which a customer can take out MPPI) and product innovation (greater integration with life and CI and greater certainty over benefit levels).
- Matt Morris, LifeSearch
The protection industry is generally in agreement that income protection (IP) is one of the best products around and should be at the top of most people's protection lists. Yet evidence shows the public is not buying it.
Part of the problem is that providers do not promote it enough. Imagine a very simple marketing message pushed by a proper advertising campaign. It could work wonders.
Also, many people purchase protection through non-advisers. Buying without advice is understandable if the client knows exactly what they want and is aware of the alternatives. The trouble is many people thinking they need life cover, would be far better off with IP. An adviser can point them in the direction of it, but many direct sales outlets do not. The non-advised market and the obsession with price in the industry indirectly affects IP sales.
So, how to cure the ills of IP? The answer is innovation. We know mortgage payment protection insurance (MPPI) and payment protection insurance (PPI) sell more policies than IP, despite being inferior products. The market needs to focus on combining the simplicity of MPPI/PPI with the comprehensiveness of IP while still being price competitive. Unless the industry re-evaluates the way it sells and markets IP, the number of policies sold is unlikely to rise.
