Times have changed, and the principles of diversion have changed. In today's knowledge-based economy old business models do not work. With this in mind, do life insurers need to rethink product strategies? We spoke to Hayley Taylor, Head of Underwriting and Ryan Chegwidden, Head: Product & Technical at Hollard Life about the life insurance sector.
Out with the old, in with the new
Product strategies, according to Chegwidden, have already started changing. “There is a clear slowing down in developing new products and changing existing products, with far few new products brought to market than before. The focus is shifting towards fewer products with fewer options so that product ranges are simpler and easier to understand,” he says.
Products with these features, Chegwidden says, allow product providers to more easily meet their obligations under the Treating Customers Fairly (TCF) principles.
“The reality is that the 80-20 principle applies to life insurance products, 80% of clients use 20% of the products to meet their needs, and the remaining 20%’s needs would still be sufficiently satisfied if product sets were scaled back. New strategies will focus on making the processes of purchasing and maintaining policies easier, especially in the face of competition from new fintech startups who see the outdated traditional processes as a significant advantage for them,” he continues.
“With financial advisers maintaining in depth knowledge of the all the products they offer, they have to limit the number of product providers that they use. Those advisers that select product providers whose product sets are simple, easy to use and easy to explain will be at an advantage. Less time spent studying and understanding complex products means more time prospecting and better-quality advice time with clients. Bells and whistles and complex conditions and interactions between products are passé,” says Chegwidden.
When it comes to innovations to disability and critical illness benefits, generally speaking there have been no ‘groundbreaking’ innovation to the actual products.
“This is largely linked to medical conditions which are largely covered. I am not sure that there is a lot of scope for innovation at this stage, this may change as the cost, availability and accuracy of genetic testing improves. In our current market Hollard was the first to launch early cancer benefits which was a game changer, but initial sales were relatively slow. Should we be asking if the market is ready for innovation or does the current compliance legislation encourage advisers to rather stick to the tried and tested?” said Taylor.
Facing the disruption
Life insurance also faces disruption as consumers go online and Chegwidden says going online conjures up thoughts of a fully self-serviced advice, quotation, application and policy issue process.
“Offerings such as this are few and far between and those that exist are mostly limited in terms of the cover that is offered, both in the amount and breadth of benefits available. Consumers may in some cases do extensive research online, both on benefits and quotes where these are available, but committing to a particular product provider and product can often be a step too far on its own. Consumers often want the reassurance from someone that they are doing the right thing or confirmation that they have understood something important. Going online does have potential but for a successful approach it must recognise consumer behaviors and meet specific needs in the policy acquisition and maintenance processes. Going online offers the potential to complement the financial adviser’s advice and the product provider’s policy application process by improving turnaround times, reducing cost and improving the quality of the service,” he says.
With regards to selling life insurance to Millennials and what is different Taylor says, “My feeling is that there is a bigger need for convenience and instant gratification, e.g. online ability, no medical testing, and the possibility to change policies easily. Previous work we did with PWC, however showed that Millennials liked to do research online, but liked the face to face interaction of an agent or adviser to complete the contract.”
A concept that has started to grow
One of the obstacles in getting life insurance is medical underwriting. Big data technology to develop predictive underwriting solutions to increase customer convenience is a concept that has started to grow with insurers. The benefit for clients and financial planners and advisers alike poses a solution but what challenges lie ahead with this innovation?
“Successful models are reliant on immense amounts of data that can be difficult to obtain, e.g. countries like the UK with a single national health registry allows the collection of a comprehensive collection of data. The same applies where there is a single pharmacy base and the ability to collect information such as medications being used. Our data is fragmented, and therefore more difficult to obtain. Reliance on rules based statistical information which means at times one cannot necessarily explain how the answer was derived. A client may need to weigh up the inconvenience of medicals against the need for less “personalized” cover specific to their particular medical outcomes,” comments Taylor.
As Chegwidden pointed out, the focus is shifting towards fewer products with fewer options so that product ranges are simpler and easier to understand. Whilst current trends will shake up and transform the industry it is only a matter of time before technology spreads widely. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts email@example.com.
This article is published courtesy of FANews. Original can be found at https://www.fanews.co.za/article/talked-about-features/25/the-stage/1145/the-focus-is-shifting-towards-fewer-products/23804