Following his trip around some of the insurance worlds most developed markets, Mark Jones talks to Paul Robertson on the lessons learnt.
A sure sign of an industry stirring into action is when it starts carrying out reconnaissance on its peer group. Several UK insurers and reinsurers are casting around for inspiration on the next big move. Munich Re and Friends Provident have both opted to look globally to reference the UK protection market.
Mark Jones, head of protection marketing at Friends Provident, has recently returned from a fact finding trip to Johannesburg, Cape Town, Sydney, Melbourne, Singapore and Kuala Lumpur. In Friends Provident's case, the trip was inspired by Australian chairman Trevor Matthews' ethos of ‘act locally but think globally'.
Talking to Cover, Jones says: "Bearing in mind this approach. I had already been doing a fair bit of desk-based research with a lot of support from the different reinsurers. I am conscious that a lot of the time here in the UK is spent competing for a larger share of a shrinking market. What we want to do is find a way of increasing that market."
Greater understanding
"While that was the background, it is not that easy to get a real understanding from your desk. When I went and visited these countries it was so much easier. Sitting opposite people you get a better understanding because there are always things people will not put down in a document."
Jones's mandate was to consider these markets in broad terms, encompassing regulation, competitors, reinsurance and trade bodies. One difference noted was the attitude of the various regulators, crucial in an innovative market.
"If you look at the Australian market, the mortgage brokers have historically been unable to sell mortgage protection products, although that is easing at the moment, and the market is likely to move quite a bit as a result," says Jones. "But this reflects on the sort of products that have been sold in Australia. In the UK, of course a large part of our market has revolved around the mortgage.
Homogenised Offerings
"In Malaysia and Singapore the regulators are far more interested in looking at both the product and the process. It takes a lot longer for products to get to market and when they do you see more homogenised offerings. As a result, the market is dominated by one or two large companies, who take things to market and then, if it is successful, the others will follow on. Once a product is launched the barriers are lowered as there is a template."
Jones did not necessarily see the Singapore/Malaysian example as completely negative: "There were times when I thought it would be a pain to operate in that manner, but usually there were pros as well as cons.
"Certainly in South Africa they are far more open to change and to differentials but the thing that struck me was that on the one hand there were the Discovery products, which have come into the UK through PruProtect - complex products that cover a lot of benefits, very different from the critical illness they have grown out of - and on the other hand, there are these very simple products in the market that you buy via your phone's SMS and which cover you for a few days.
"It is possibly the most innovative and experimental of the markets I came across. I'm not suggesting they don't know what they are doing, but they seem to have the ability to get out there and try things. It is cheaper to get to market out there and it is a huge potential market they have, with the ability to move into other African countries if it is successful.
"There is also a massive variety of consumers, from the affluent and sophisticated to those with very simple needs - with not so much in between. The other thing I was impressed with was in South Africa, where the segmented market was acknowledged and then products were developed to meet the needs of those segments, rather than going for a bland middle ground."
When comparing to overseas, Jones was struck by how the UK tends to be far more open and careful in the way that we communicate with the consumer. He noted that in Australia one of the main products they sell is yearly renewable term assurance. This increases each year with age.
"I was talking to the Institute of Actuaries of Australia and they were explaining why it is so popular - it is very much a cultural thing in people not wanting to pay for cover that they might not need in the future," says Jones.
"I asked if people were aware that it would cost more with age. They said that this didn't put people off. But when I asked if they knew how much it would actually cost, they said people were free to look up how much it would cost.
Achieving a Balance
"In the UK it would be very much a requirement to tell people how much it would go up by and to give examples. In Australia it is not, and they have no problem with that. People can look the information up, it is not hidden. The question is, are we being fairer here in the UK or are we just giving the public more reasons not to purchase? There is obviously a balance to achieve."
Jones was nevertheless impressed with the way protection works so well within employment in Australia. "Paying through the superannuation funds paying just a little makes everything so easy. These are effectively group life schemes and as a result coverage in Australia is that much greater. I wouldn't say they are fully protected though. There is also a vibrant market outside the superannuation funds but within them it is so easy to buy protection at reasonable cost, without the underwriting barriers."
Whether there is any one thing that we could take from the context that it is in now and bring over here, be it social, political, tax based or regulatory, and drop it in unmodified is doubtful, according to Jones. However, he identified a few things he thought would not work on any scale here in the UK. One example is a product that repays all the premiums at the end of the term -although The Children's Mutual has such a product here in the UK.
"This came out very strongly when we were in Malaysia. The Chinese community would need something back. In Malaysia, they tend towards paying back a percentage of the premium. However, it is difficult to see the target market for that type of product on a large scale here in the UK - though far be it for me to say Children's are wrong.
"There were no real eyebrow raisers, but the African approach of taking short term life cover, a few days, based on the fact that the roads are so dangerous wouldn't necessarily catch on here, nor would it attract the right sort of behaviour."
Hard Hitting Advertising
Somewhat more peripherally, Jones was interested in the advertising in South Africa, where there is a lot of business to consumer radio advertising, quite hard hitting. Also the Australian version of the ABI have been low key advertising for a few years, it is trying a slow burn approach just to raise the concept in the mind of consumers.
"It's an interesting approach as people can be suspicious of big blasted campaigns," notes Jones. "The problem is that sometimes it can be difficult to get a group of insurers to agree on a great deal. However the UK industry is getting a little bit of momentum in this direction but whether it will succeed is still unknown."
One barrier to advertising is pricing: "When we look at products, the UK ones are very keenly priced when compared to others around the world. The thing is, I don't believe that price is the big barrier to protection in this country. These thin margins don't help the industry when it comes to going out there and promoting insurance more widely. So whether our thin margins are a sign of us being more advanced than others is moot."
In summary, Jones would be very disappointed and very surprised if as a result of us going out there nothing changed here. He feels the industry should perhaps move away from products that have served the industry and consumers well in the past.
"Things have moved on and we need to check that they are still exactly what is needed. That is not to in any way suggest that there are toxic products in this industry. People are in a far better place having purchased the products that are out there, but we need to clarify if there are any improvements that can be made. We need to understand the consumer then we can look at the products in the market and either adapt them or throw them out and start again. This research is another feed into this process."
Mark Jones is head of protection marketing at Friends Provident
