Category Archives: Financial Services

Cheap Rate Life Insurance is increasingly just an Illusion

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Price rules in the term assurance market.

Compliance, the comparison engines (such as IRESS and iPipeline), and the consolidators perpetuate the notion that cheapest is best.

Cheap Rate Life Insurance

Over the last two decades I’ve sat in sales a marketing meetings and heard a similar plea from the sales teams.

“We have to be competitive”

“We’ll need to be there or thereabouts”

“Top five but average third or we’re out of the race”

You’ve heard these phrases to haven’t you? You might actually have said them on occasion.

In order to keep headline prices low, providers re-tender their reinsurance frequently, and re-adjust their prices daily.

But cheap rate life insurance is increasingly just an illusion.

Despite competing fiercely for the cheapest headline rate, providers do not actually accept all clients at these rates. Ordinary rates acceptances are averaging 75% compared to 95% over a decade ago.

That means one in four clients don’t get the rate quoted.

If you went into a supermarket and one in four of the items in your trolly was incorrectly priced would you be happy? No. You’d complain. Why is it acceptable then in the protection market?

One company allegedly only takes 65% of cases at ordinary rates. That’s even worse.

In order to charge extra for the 25-35% providers have hardened their underwriting terms and routinely gather more information on applicants, either through longer application forms with reflexive questions or tele-underwriting.

It’s a strange situation that an industry that makes such a big deal out of offering the cheapest rates, actually disappoints at least one in four of its customers in this way.

Advisers and consumers constantly complain about the lengthy process brought about by this underwriting approach and clamour for simplified acceptance. But of course simplified acceptance requires a higher headline price which does not fit with the mechanics of the industry.

And the cheap headline rate prevails.

We discussed this issue at the Protection Review Conference in London recently. The majority feeling was it was wrong. But I felt little appetite to do anything about it.

How long will it be before this practice becomes unacceptable? When providers load 50% of cases? Or 60%?

There’s an opportunity to try something different here. Perhaps to introduce a pricing system where the client has a better chance of getting their quoted rate. Or a shorter application process in return for a higher start price. Launching such a proposition would be difficult given the focus of the market on headline price.

There is at least one way we could move to a shorter application form without hiking the price too much.

But is anyone brave enough to do it? And would a market that’s stuck with the illusion of cheap rates accept such a solution?

Now it’s your turn:

Do you agree that cheap rate life insurance is increasingly just an illusion? Is it acceptable that we disappoint 1 in 4 of our customers? How do we break out of this cheap rate trap? Please leave a comment or post a link to your own article.

3 Unsurprising Facts Unchanged in 20 years of Protection Insurance

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How long have you worked in financial services?

It’s amazing how technology has changed but the communications challenges we face are the same, don’t you think?

3 Unsurprising Facts Unchanged in 20 years of Protection Insurance

I often get asked to speak at local adviser events. A popular topic is sharing marketing ideas about how advisers can grow their businesses.

An old colleague,  who I’ve not seen in over 10 years, recently invited me to speak at his lunchtime workshop. On the guest list I saw another couple of names I recognised from my early days in the industry. From the 1990s.

Speaking about growing the protection market is fascinating. Talking to people with whom I had similar conversations  two decades ago even more so.

When I thought about what I would talk about, I realised that some things have not changed at all.

  • People still do not think that they need protection insurance and even those that do, think of it as a grudge buy
  • They think that it is too expensive
  • They believe that insurance companies will try hard to find a way to decline claims.

Deeply engrained in consumers’ minds, these views prevail despite evidence to the contrary.

On top of that, apart from a surge of critical illness sales in the late 1990s and early 2000s, “flat” is how you would describe the protection market.

Yet, the way we do business has changed completely. Back when I started, we enjoyed our own telephones on desks for the first time. And HR departments were as worried that people would waste their time on the phone to friends as they are about them spending time on Facebook now.

No individual PCs, no internet and no mobile phones. We faxed hand calculated and typed quotations to advisers.

Sales consultants travelled the country with sacks full of 2p pieces for phoning the office from public call boxes. We advertised in the trade press. But unless you were in London you didn’t get your copy of the trade papers until the following week.

Now we have information overload on the Internet. Communication by mobile, Skype, iMessage, Facetime and video conference.

We can get instant quotations.

There are more channels for marketing communications across hundreds of TV stations, electronic bill boards and ads within apps.

And social media opens up a different way of engaging clients.

All this happened in less than 20 years. As a marketing person it’s fascinated me to see these new methods of communication develop.

But, despite technological developments beyond the dreams of most science fiction writers, the same three reasons why people don’t buy protection insurance prevail now as then.

Overcoming those objections requires the same approach. I’ve always believed a “Face to Face conversation” to handle those objections best approach. Twenty years ago. And today.

Of course to talk face to face we no longer need to be in the same room. Now we can talk “FaceTime to FaceTime“. Or “Skype to Skype“.

The digital technology revolution hasn’t changed the way people feel about protection. But we can use it to encourage more people into face to face meetings. That is where future protection market growth will come from.

Now it’s your turn:

What’s changed for the better over the last 20 years of protection insurance? What would you still like to see change? Please leave a comment or share a link to your own article.

What use are great protection claims statistics if no one knows about them?

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There have been some great headlines recently shouting about how many protection claims we paid last year.

Here’s one from Money Marketing Magazine.

“Protection industry paid out £3.1bn in 2013”

And another from Financial Adviser magazine.

“ABI: Insurers paid out 97% of protection claims”

Undoubtedly these are great protection claims statistics. As Dougie Grant from Aegon says in the Financial Adviser piece, “The figures released by the ABI today shatter the illusion that insurance companies don’t pay claims and demonstrate how important it is to have cover in place.”

You can’t argue with that.

Protection Claims Statistics

But as great as these figures are it’s like hundreds of trees falling in the forest. You won’t hear them fall unless you are there to see them. The public still think that protection providers actively try to avoid paying claims. In fact they think that we pay out less than 40%. And articles in the Daily Mail and features on BBC Watchdog fuel that perception.

Only a very few people will go looking for great claims statistics like this. Confirmation bias means that they’ll seek out the negative articles that confirm their belief that we don’t pay.

Articles like this are great for an adviser to whip out when a client  raises the question about a companies willingness to pay. But main stream audiences aren’t seeing them.

So what are we doing to promote these amazing claims statistics? Where are the case studies with claimants? Where are the video testimonials from clients? Where are the interviews with people holding their cheques?

Statistics alone will not change deeply rooted perceptions. We need to tell the stories of the people whose lives have been affected.

Or better still let them tell their stories themselves.

Do you agree? Leave a comment below and share your thoughts.