Why are today's consumers so vulnerable to imagining levels and types of protection cover that they in fact do not possess? Kirsteen Grant examines the research.
General insurance products have an advantage in that there is a need to communicate to the policyholder on an annual basis.
Regular contact not only reminds them of their policy and the benefits it brings, but it also provides opportunities to reinforce the customer relationship. Without regular contact, providers are unable to keep up with people as their lives progress and their circumstances and needs change.
We all know that people don’t wake up thinking about protection. It is something they need to be encouraged to purchase through clear explanations of the potential impact of not having any cover.
The sales process works well with the guidance of an adviser, but this is proving more challenging in the direct market. By keeping an open dialogue with consumers, providers can automatically reach people at life’s trigger points, such as buying a house, getting married, living with a partner, having children, or getting a divorce.
The research found that the younger generation (particularly 18 to 24-year-olds) want to deal with companies that offer more open communication. This is a trend that will continue to grow.
When looking at the household financial decision-making process, with men and women enjoying equal access to education and employment, it is becoming increasingly hard to accurately predict the decision-making process in any given household. The research found that gender alone made very little impact, with both sexes taking an equal role.
An individual’s life stage, on the other hand, plays an important part in financial decisions and priorities. As people progress through life, they have to adapt and accommodate often significant changes in circumstances.
As a result, consumers gain increased responsibility and confidence in their financial decision making as they get older. This is supported in part by a growth in earning power and experience of financial products.
Not surprisingly, younger age groups continue to be more reliant on their families for financial support, with many living at home. As people become financially independent, they build confidence in their decisions.
For many, their first taste of independence is university, which is a largely untapped market for our industry, despite being utilised by banks to begin early financial planning and relationship building through the student account.
This market could be captured with simple critical illness products offering low cover limits which could help support the payment of student fees. Little steps to get people thinking about what they have could be the way forward for long-term relationships.
Women take more of a back seat in decision making during the ages of 35-44, which could be due to working part-time or staying at home with children, concentrating on day-to-day concerns rather than financial matters. The main financial priority for this age group was saving for their children’s future, which could have a detrimental effect on their retirement aspirations.
When people reach 45 the pattern of equality returns along with increased confidence which is expected through experience. However, 55 to 64-year-olds were the age group most likely to consult a professional. This could be due to retirement becoming a life goal and financial matters becoming more complicated.
More than four-fifths (83%) of people take responsibility for their own financial planning rather than seeking the advice of a professional and 70% state that they keep up with their financial matters. Consumers are obviously aware of their finances. The challenge for the industry is to get on their priority list and find solutions to reach them.
There is a need to focus on the positive aspects of protection throughout the buying process whether this is face to face or online to remind them of the reasons why they need cover.
Information alone is ineffective to stimulate action. Open channels of communication are undoubtedly a first step to engage consumers. With knowledge, consumers feel more empowered and confident to make a decision. Without it, the ‘when in doubt, do nothing’ approach occurs.
A CLEAR WAY OUT
One of the biggest findings is that while many consumers appear confident in making buying decisions themselves, we should not disregard the benefit of providing advice within the process for future clarity. We need to become more transparent with access to purchase products easily online for those that wish to utilise this channel.
As an industry we have been slow to embrace new technology and the opportunities that these afford us are vital for future growth in both engaging with potential and existing customers. For younger generations, the biggest obstacle to insurance purchase is access.
There are now more than 50 million internet users and we have to devise ways to deliver through these mediums. While the direct market is still tiny, the simple product initiative in terms of both proposition and underwriting will determine how successful this market can be. Consumers will always choose how they transact – if they do at all. They will not adapt their buying behaviour to our traditional channels, but utilise what they are comfortable with in other markets.
The value of offering a complementary service of both advised and direct access is needed to effectively service key sectors of the current and future market. Some are confident to make their own decisions, while others want more advice and choice to make an informed decision.
As an industry, we need to involve people within the buying process at the outset so they understand the products they eventually purchase. Whether the sale involves an adviser or a direct purchase, we must pass the responsibility back to the customer.
This will increase their understanding of the benefits and limitations of their cover. An example of leaving the responsibility to someone else is when you ask a car passenger to remember the journey, many struggle. However, when driving the vehicle, the person is more likely to have a clearer memory of the route taken, recalling key points along the way for future reference.
The current process of buying is often perceived as difficult. From the outset, we ask people to apply rather than join, putting up immediate barriers. The underlying impetus to buy is then diluted if any unnecessary delay occurs.
To engage customers in serious consideration of our products is one of the toughest challenges for our industry. To then lose them halfway through the purchase process is a significant problem that needs addressing.
We must find a simpler customer journey throughout the whole buying cycle, using less jargon and more transparency, offering clearly defined product benefits that are relevant to each life stage.
A multi-channel communication approach would leave less room for ambiguity. To be successful we need to widen the protection customer base and achieve higher customer satisfaction at point of claim by delivering products that match their perceived reality.
Kirsteen Grant is marketing manager at Hannover Life Re (UK)
