For Fortis' Martin Werth change is all in a day's work and should be for the rest of the industry, he tells Paul Robertson
Martin Werth is a busy man. As managing director of Fortis Life UK he is overseeing a mass sign up of IFAs, preparing for a name change and trying to increase his brand's standing in a fairly flat market.
An actuary by training, his conversation is surprisingly free of figures and is heavy on the consumer angle. However, day to day, his focus is on the details of Fortis' roll out to the market.
The provider's approach has been a controlled roll out, starting with key partners, then expanding with the networks, starting with the appointed representative networks (AR) then moving to the directly authorised (DA) advisers.
"It's not that easy though," says Werth. "Going whole of market was a flick of the switch in terms of allowing quotes but it is far from a flick to register that business. It's a lot of hard work, we are pretty much on target, but this process is going to take a good six months.
"We need to go through the process of registering all the brokers, particularly the directly authorised ones. When we register an AR network we register everyone underneath it, but the DA's are on an individual basis and there are 12,000 firms to be registered."
Werth was talking to COVER before Aegon announced it would be staying in the individual protection market, having left the group side earlier in the year, and before Progress from Royal Liver shut its doors on the market. However, with AXA consumed by Friends Provident, Skandia dropping some of its lines and Scot Prov effectively under the same management as Bright Grey, the question is, what is going on?
Werth explains: "You need three things right in this market. The belief in the market; the belief that it is a natural fit for you as a company; and that you can operate in the market in an efficient manner. If any point is missing you will not make it.
"You can't play on the fringes of this market. It is very competitive and the demands on systems and processes are high. Companies at the edges that are perhaps not doing enough or who's systems are a bit old fashioned could be struggling. This is a thin market when it comes to margin."
Fortis is all ready a large personal lines company so has no plans to enter group markets. "Going group would step us out of our home markets and, anyway, we see so much potential in the individual protection market that, if we get our focus right, we will get the impact in that market," says Werth.
He is very strong in his opinions of the present market, seeing fault in the entire system. "If we looked at this market as a just landed Martian, we would say ‘Look. There is a huge unmet need and they are doing it wrong. They are selling the wrong products.' The UK protection market is not meeting the needs of its potential customer," says Werth.
"It needs a new approach in terms of servicing and offering. We see this as a large market in which traditional players with traditional thinking have constrained their ability to access that market."
Putting his actuary hat on for a moment, Werth points out the market potential. "Ignore Swiss Re's protection gap for a moment and look just at the amount of UK personal debt. It is about £1.5tn. That is a huge amount that people do not necessarily have protection for.
"Then look and see that over 50% of the market has no protection. The 50% that do invariably only have death cover. About 73% of what we, the industry, sell as policy count is just death cover."
He adds that research shows the public exaggerate the risk of dying and are keener to insure risks they feel are out of their control.
"So a customer will tick a box for insurance against dying, it's quite a low premium, so makes sense. Critical illnesses are out of their control, so they see sense there. Income protection, which all industry players believe should be the bedrock, will find many customers thinking: "Stress? Back problems? Nah, I can keep working."
People feel this is in their control. Until it's not; and then they suffer.
"In the advised market the future really is in expanding the rage of covers that the customer is protected against, as opposed to just replacing term assurance," adds Werth.
So what's to do? Fortis of course has Real Life Cover, which seeks to cover most of the bases. But even Werth admits this has had its setbacks.
"When we launched and introduced Real Life cover we hailed it as a great product. But in fairness to IFAs it is hard, if there is no competitors to Real Life Cover, to demonstrate how it fits alongside other products," explains Werth. "So innovation is needed but we can't have just one company do it. The market also tends to introduce complexity, when we should be probably introducing simplicity."
Simplicity for Werth does not mean simple over the counter products along the lines of South Africa's Zimele products. His worry is over whether customers understand the cover they have and the cover they haven't got.
"We need to build confidence in our industry. Therefore if customers buy products they don't fully understand, without advice, we need to let them know what it doesn't cover, as well as what it does," says Werth.
"The biggest concern is customers believing they have more cover than they actually have. I'm not against non advised products but the risk warning is that customers need to understand that they may only have a limited amount of protection.
"A customer who goes home and says "I sleep well at night" when their cover does not meet their need is a risk to confidence in our industry."
Werth has identified two forms of business that allow firms to be successful in this market. Either have a strong product and a good client base or be very efficient and compete on a transactional basis with price as the selling point. Werth notes the latter is typically term assurance, under stiff opposition from the internet and non advised sales, so you need to be extremely efficient in order to compete successfully.
This brings us to the former, relationship based model, and is why Fortis sees menu based plans as the future. "A menu plan can convert a transactional relationship to a personal one. Menus encourage people to take a little insurance here and there and gives a reason to revisit the client. I would encourage the industry to move away from price to encouraging wider cover. This is the future for IFAs."
Research indicates that the public does not understand the difference between income protection and critical illness, thinking both cover their needs should they not be able to work. Werth wants to start with how a customer thinks.
"Any customer who has a claim declined may have had a genuine need for cover which was not met. So on things like total and permanent disability we should probably address the wording to reduce misunderstanding but we should also recognise there is a need that has not been met, " he says
"Every claim that we don't pay out we should learn from. Clearly there are those trying it on but in the main there goes a genuine need that has lost a person's trust and that of all the people they know. We have also lost a sale in that that person was allowed to leave thinking they were covered. If we know people misunderstand we should incorporate that."
