The size of a market is transformed by the arrival of a product that meets consumer demand in that market, says Tom Baigrie.
For a market long fed up with providers who seek only to grab market share by reducing their risks and cutting their headline premiums, there is now another way to grow the market for protection sales. There is finally a joined up industry-to-consumer communications initiative; and that effort has successfully reached its pivotal point, on time and in good order.
In September a campaign proposition, approved by the industry’s selected steering committee, will be placed before the leaders of each insurer and reinsurer. They will see an impressive understanding of the task and a properly costed solution and decide if they can meet the bill needed to get the great British public to better understand their need for our products and thus to want to buy them.
But in seeing this endeavour through, we must be aware that the easiest way to grow a market is to develop a product that everybody wants. But all life company execs asking themselves which new product development can turn around the fortunes of their employer first face the serious dilemma of whether they are seeking to do so by developing a product that can grow the market, or rather one that can seize market share in the short term. All the signs are that the answer is that short term market share is all important.
That would explain the host of products aimed not at addressing consumers’ real needs in a new way, but rather at achieving process and pricing advantages over their peers. The new versions of the same old same old, one could say. A look at recent new protection products produces the table below.
It’s immediately obvious that these developments are about winning business from aggregators and non-advisers in particular, where simplified process is important. Ironically, there is much sympathy with this view amongst advisers.
Lifesearch’s telephone based advisers meet many customers who do not want advice, who think that protection products are best bought as is motor insurance and who have no understanding that their medical history is a vital factor in which provider offers them cover they can afford. We too use these products to meet this consumer demand, when we can’t persuade customers to spend time doing the job thoroughly.
A Damning Indictment
The overriding truth is that the 2009 crop of innovation is broadly designed to sell products with fewer benefits more easily. All are geared to taking market share at very low margin, and none are aimed at drawing new customers into buying protection.
Perhaps that’s to be expected in a market that barely markets itself to consumers, where CEO’s of businesses that take in premiums of £1bn a year as part of a health and protection insurance industry worth around £10bn a year, are expected to be very reluctant to stump up relatively tiny amounts needed for an industry marketing campaign. But it is nonetheless a damning indictment of the lack of vision, ambition and desire amongst the decision makers of the protection market.
In making my insistent demands of them that they change this, we have grown to understand their fear that consumers will not now ever grow to buy what we sell in greater numbers. With death and mortality risk shifting ever later in life and recovery rates from all forms of illness and accident improving and shortening, consumers fear the risks we protect against less and less.
A quote from Richard Verdin, then a leading non-advised distributor, now the man in charge of Aviva’s remarkable TV campaign, which sees them giving free cover to the parents of newborn children, was: “The reason people don’t buy Income Protection is because they have other coping strategies.”
By this he meant that, whether or not we think them wrong, naïve and mathematically challenged, most people think they can survive a period of disability somehow, and that their standard of living will not drop intolerably.
Whether it’s thanks to their savings, parents, friends, a charity, a charitable employer or the state, they think they’ll muddle through, especially as, while they know they will die one day, they don’t think physical disaster will befall them personally. Like soldiers, we slog on through life on in the totally normal self-delusion that “it’ll not happen to me.”
That delusion is part of the human condition and the part of it any marketing effort has to change.
But the good news is that the very extensive research commissioned as part of the marketing initiative referred to above showed clearly that there is a very substantial number of people who do understand their vulnerability, but who feel unable to move past the ‘coping delusion’ because they are totally confused as to what products and services are on offer to help them build a proper strategy to protect themselves and their families.
Confusing, Unappealing and Complicated
Our present range of products is confusing, unappealing, complicated to buy and rarely explained to the public. It would be fair to argue that that last job is the preserve of those who sell it, who face the public, the IFA. But one must in the next breath resignedly acknowledge that these businesses, are commercially incapable of delivering consistent persuasive national scale marketing efforts.
They can seize on them and easily be persuaded to focus more on this vital area, but they need to be led there by awakening consumer interest.
Consider the Fidelity PEP campaign of the late ’80s that took a then unknown brand and out of favour product and in the space of three months turned it into the IFA’s standard recommendation. There were two parts to that success. The first was a marketing campaign that covered just about every billboard in the land, but the second was a product. That one was constructed by the last Chancellor to love savers more than borrowers, Nigel Lawson.
The Challenge
In 2009 the protection market cannot expect any such gifts. In the meantime someone in the industry needs to develop the perfect product and back it with serious marketing spend. It will be easier if it follows a general industry campaign as I hope might happen next year, but whether or not that happens, the key product requirements are easy to specify.
It needs to comprehensively address risk people should – and can properly be made to – fear. It needs to be simple to understand and buy and should pay out without any unfairness. It also needs to cost an average person between £20 and £40 a month.
It seems obvious that, though we may have, generally false, coping strategies, there is no doubt that what we should all fear is the loss of our income or ability to care, howsoever caused.
For simplicity focus on the ways breadwinners can lose their income. Offer them an easy to understand benefit in that event, no matter how it happens. And merge the general insurance risk of unemployment with the traditional life market risks of death, incapacity and critical illness in one product which offers comprehensive cover with opt outs, not opt ins, as well as a fair claims assessment and payment system.
All of that will take some premium to pay for, but if you limit the CI benefit and don’t enslave yourself to the perfect IP product you can charge a profitable amount within the affordability scope of the average earner.
Tom Baigrie is managing director of LifeSearch
