Expanding the protection market to new audiences is one of the most important challenges facing the industry at present. Owain Thomas meets Marco Forato, who is charged with that task at Unum
Since the collapse of the Consumer Protection Insurance Engagement Campaign (CPIEC) a year ago, there has been a movement growing within the market to increase public awareness of their protection needs.
How this can be achieved is one of the most discussed subjects at present, with some suggesting a collaborative effort is most desirable, while others have taken their own path towards brand and product promotion.
With a consensus on industrywide action by providers not appearing immediately obvious, Unum took the step in the autumn of advertising for an agency to conduct its own campaign.
As Marco Forato, chief marketing officer at the insurer explains, the idea is still under consideration, but there are some basic premises should it go ahead.
"We are definitely evaluating the possibility and viability of an educational marketing campaign to the general population," he said.
"We are asking ourselves if we can get this done just by going down the distribution channel, or does it make sense to help the industry to educate the general population by more of a direct marketing campaign? It wouldn't be a sales campaign saying ‘come and buy this from us,' but very much posing the question ‘do you understand this risk you have? Are you covered? You should talk to your IFA or employer about your options.'
"In another month we'll have a better sense of what route to take," he added.
With the main reason for CPIEC's failure being the cost of a mainstream media campaign, many in the industry have called for an increased use of new media to engage with the public and alert them to their financial vulnerability in a far more economical way.
New media tools
Forato recognises the need for any promotional drive to utilise social media far more effectively and promises it is something on his radar.
"The old age of advertising where all we did was put something on TV and people would understand it - that's over," he said.
"It's important to use old media as one channel, but what's happening now is about generating conversations - I'll talk to you, and you talk to your friends. We need to let consumers talk to their friends about it.
"New media is the new tool, so there's no doubt if we were to do a campaign we would have to include new media along with traditional media."
With the ongoing welfare reforms still a hot topic in both the nation and the protection market, key to the strategy is raising public awareness of the actual value and likelihood of receiving benefits and enabling customers to make an informed decision.
"It should all be about educating the general population and working with government and finding ways to make people aware that if they believe the state will take care of them they are mistaken," he explained.
"It doesn't happen today and it's just going to get worse in the future. There's a misconception that if you need it, the government will give you £30,000 a year because that's the one case that's makes the front page of the Daily Mail. I just want people to make an educated decision, and if they decide not to buy it, it is their decision and we must respect that.
"Today they are not allowed to make decisions, and when they are they don't have the facts and understand the situations," he added.
This is a process which he feels has to be industry rather than government led, although a partnership between the pair would be welcomed.
An untapped market
Whether the advertising strategy gets the go ahead or not, its clear Forato believes there is a viable, largely untapped market already available to IFAs. Throughout our conversation he repeats the terms ‘employer' and ‘employee,' and is upfront about his determination to grow the market through the workplace.
"We are committed and focused on extending the group income protection (GIP) market in the UK, that's our strategy and where we believe a very significant opportunity exists.
"It is definitely the most efficient way to get to the general population and besides that, the advantage on the group side is spreading risk so people who would have a hard time getting cover individually, or for whom the cost would be prohibitive, can do so on a group. What we need to do is work on employers that they should be offering it to all their workforce, not just the top 10% or senior executives.
This can be a daunting task for advisers who attempt to encourage employers to spread their coverage to a greater proportion of employees. With policies often aimed at the higher end of the market, this can result in a huge increase in costs which many bosses often baulk at. This situation is down to a function of the industry, Forato explains, but it can be easily rectified by using creative methods and encouraging advisers and employers to realise that some coverage is better than none.
"For us to expand the market we have to make products that are simpler and cheaper," he said.
Meeting every standard
"We have this concept where you either offer the gold standard or you get nothing, which produces a gap in the middle, so having a product that meets those needs is something that needs to be done. We can show employers and brokers that you don't need to offer the gold standard. The most typical product is 75% earnings up to age 65 with cost of living adjustment and own occupation, but if its 60% salary, any occupation with no cost of living adjustment up to age 65 the cost is less than half.
"And isn't that better than nothing?," he added.
His American influence is also readily apparent, suggesting that instead of employers typically offering four times salary life cover to their workforces, they could reduce that to two times salary and use the savings to provide a basic level of income protection. This could then be topped up by employees who deemed it was important for their financial situation.
"The likelihood of being unable to work while working age is higher than of dying.
"It is much better coverage for the employees being covered against both, they won't get as much but will get both. I totally accept that a 22-year-old single person does not need as much protection as a 35-year-old with a house and three kids.
"So why not offer the basic level to all and let the 35-year-old buy up on a preferential rate because they are doing so on the work site and can dilute risk. That I think is a much stronger proposition."
While this may seem like a seal of approval for all cut-down products, Forato does not believe limiting the term of the contract is the way to reduce costs. This is particularly so when addressing the impending removal of the compulsory retirement age and implementation of associated age discrimination legislation that could hit the market hard. Although the insurance industry is expected to receive an exemption, it is the employers who face the biggest challenge if they too are not afforded the same luxury.
"All we know is, the government said they were going to release their legislation in mid November, so we're anxiously waiting to see what it says," he said.
"Some intermediaries are suggesting offering a five-year term because age doesn't matter there, but I think that is wrong - and a wrong action won't fix another wrong. You can't dilute the value of a product. We need to be creative and come up with a solution and continue to protect people as long as they decide to work without increasing the costs in a way that become prohibitive. But just limiting the benefit is avoiding the problem," he added.
If Forato's grand plan is to pay off, it will in effect, need pan-industry support. Educating the public is not something that can be done by one voice alone, penetration by IFAs into the workplace will be key and insurers must provide the solutions.
"We've got to be able to produce products that are affordable and services that meet the requirements of the consumer and employer. That's what we're working on," he concludes.
