Kirsteen Grant looks at simple products as a key piece in the puzzle to help providers raise consumer awareness
The government, as quoted by the Treasury, wants to “restore confidence in the financial system and encourage people to take responsibility for their finances.” There are a number of initiatives in hand – one in particular is the recent Simple Financial Products consultation, aimed at creating an environment of understanding of the options available for finances.
But is it as simple as developing a new basic product range? Perhaps the simplicity needs to come from the language used with consumers about the benefits of the product offering, which in turn reflects the need.
FILLING THE VOID
There are examples where the need is known, but no action is taken. A good illustration of consumer inertia is wills. Most are aware of the need to make a will, but nearly 70% of people die without doing so. Education is only part of the solution. The missing piece is relating with consumers.
The industry, working through simple products, should increase accessibility, awareness and knowledge which in turn will support deeper market penetration for protection products. Joint research by Hannover Life Re (UK) and the Protection Review was done to understand how and where consumers investigate and purchase protection products, along with gauging their awareness of these products.
When asked how they would cope financially if they were off work for a long time due to accident or illness, 67% said they would utilise their savings, 49% would rely on state benefits and, worryingly, 29% said they would sell their car or their home. These are all short-term solutions and clearly highlight the need for further education.
Reasons most frequently cited by respondents for not buying critical illness and income protection cover were “I haven’t thought about it” (27% and 23% respectively) and “I can’t afford it” (26% and 22% respectively).
Responses demonstrated a sharp disparity in available income between the sexes, with 34% of women, compared to 16% of men, stating they could not afford critical illness cover. These are some of the perceptions that, as an industry, we need to change. A new product suite alone will not address these issues.
More than a quarter (26%) had not thought about buying life insurance, while more than 20% confirmed their main reason for buying critical illness or income protection was as part of a wider financial planning exercise. These results suggest many consumers still need to have the case for protection cover explained to them.
Other findings from the research revealed that the internet was the overall preferred choice for advice. But when it came to purchasing protection products, the web (29%) was closely followed by banks and building societies (23%), and IFAs (22%). Distribution channels, such as supermarkets and direct mail, are the least preferred routes through which to seek information and purchase protection cover.
This could well imply that, even though consumers like to research products online, they still prefer a level of contact at the point of sale. The human touch remains important, whether face-to-face or over the telephone, to provide them with guidance and support when purchasing protection products.
However, there is no right or wrong way to search for information or buy a product. Each individual has their own comfort zone and no one size fits all.
A NEW STRATEGY
The rapidity with which new media have been adopted should not be underestimated, nor should their appeal across all age groups. Are protection products well aligned with current lifestyle trends and needs? Are we reaching consumers through the right channels?
Simple product offerings could naturally suit new media for ease of access and product understanding. In today’s time-starved society, consumers want to action their requirements simply and quickly. With many people now having limited access to banks and IFAs, new media channels offer most consumers access to products and services from their homes. This offers us a great opportunity to use these tools to increase awareness and interest.
What does the concept of simple products really mean to consumers? The simple product concept should not be restricted – it should be broader than just features and benefits. Further consideration of accessibility, application process, and the ease of understanding the product and its benefits need to be part of the proposition to create a truly simple offering.
A collaborative approach with the government could certainly help contribute to that clarity, as well as publicly highlighting the need for consumers to take more responsibility for protecting their incomes and lifestyles. Any initiative that encourages consumers to review their financial situation, understand their needs and take action can only be a good move for the protection industry.
Further research will be conducted throughout 2011 jointly with the Protection Review to gain more insights of consumers changing needs and a greater understanding of their protection choices.
Kirsteen Grant is marketing manager of Hannover Life Re (UK)
