The downgrading of protection's value post purchase is a prime factor in making it a grudge purchase, according to recent research. Jo Miller says better contact with customers is key to changing consumer attitudes.
The dominant theme running through the answers was peace of mind and reassurance. Any product offering peace of mind should be very attractive to consumers and a straightforward sale, but it is here that optimism bias occurs, with our potential customer discounting the risk they face and choosing not to buy.
Although this does not guarantee peace of mind, it does mean people avoid what is not always a straightforward purchase process. There will always be a proportion of people who prefer to live with risk, represented in our survey by the 78% of people who told us that they wouldn’t consider insurance (and this included people who already held insurance).
So why isn’t peace of mind enough to ensure sales of protection insurance go through the roof? The research by The Syndicate shows that, for many, the appeal of insurance does not compare favourably to the alternatives.
One such alternative is savings, and the research looked at the level of savings people thought they would need if they were unable to work. The mean average answer was £1251 per month. In 2012 The Syndicate revealed that, on average, people held savings of £5500, providing a cushion of 4.3 months if they were unable to work.
In contrast, an income protection policy that pays out £1251 a month benefit costs from around £20 per month (with a three-month deferred period), paying out up to age 65 if someone were unable to work, offering a much greater amount of long-term protection than the 4.3 months for which people could currently cover themselves.
Communication breakdown
We can clearly see that protection products represent genuine value when compared with the provision the majority of people are able to make for themselves independently and, given the dual purpose of the savings pot, offer a much safer and more substantial financial safety net in times of need. But this message isn’t getting through to the consumer, and herein lies the opportunity for the industry: communication.
Within the research, 70% of those holding protection insurance products could not recall any contact from their insurance provider in the last two years.
Of those that could recall contact, it was not viewed particularly favourably, with the majority suggesting they had been contacted via a sales call or to review existing cover. Our track record in communicating the value of our proposition is not good.
We are missing an opportunity as an industry to illustrate the value of our products to our customers and potential customers. As one industry executive commented at the launch of The Syndicate research: “If we truly believe we have good products, we should be shouting about it. It is the industry’s responsibility to tell the consumer, not wait for the consumer to want to find out.”
Regular reminders that our products represent a cost-effective way of protecting people financially will help our products feel more tangible to our customers and keep the purchase front of mind.
New technology and social media provides ample opportunity for us to reach people in new and innovative ways, to remind them that we are here, that they are covered (or can be) and that insurance is a purchase that can make a real difference.
The Facebook ‘look back’ initiative struck an emotional chord with people because it reminded them of what is really important to them and the role that Facebook plays in celebrating that.
Insurance has an important role that it could play in people’s lives and yet we seem reluctant to remind anyone of this fact, preferring to send customers a policy that so often remains a forgotten document in the drawer.
Unless we can find a creative way of changing this situation, protection cover may never lose the grudge purchase tag.
Jo Miller is research manager at Protection Review
