Exeter Family Friendly chief executive Andy Chapman remains committed to the virtue of simplicity.
The obvious question is, assuming this all gets put in place, why would they sell better? Is product and systems design the be-all-and-end-all? Why are we waiting for the Treasury to tell us what design and systems to use?
Ahead of the Treasury
Exeter argues the industry is already ahead of the Treasury and its own Bills and Things product is virtually the image of a simple product.
However, Chapman concedes the sector just needs a nudge. He said: “Insurers have made products very complicated to ensure they get only the very, very best lives they want to insure. So, effectively, we are going to a super preferred lives basis at the moment.
“If simple products pulls us back from that and enables more people to buy products because they understand them, I think this is what will kickstart the market.”
“I actually do not think that current product design is particularly wrong. Take income protection [IP] for example. You pay me and if you are ill and you cannot work I pay you money. What is more simple than that? It is what has happened in the intervening time to make sure we do not get caught out on this or that which is the problem.
“If we just all relaxed, maybe increased the premium slightly so we do not have to have so many caveats and ifs and buts on our products, we would be home and dry.”
When the topic turns to private medical insurance that old favourite, medical inflation, raises its head. If public perception of a failing NHS results in greater sales, how will the sector control medical inflation?
Chapman noted inflation comes from two areas: “There is the area where new advances cost more, but those costs come down. A new wonder drug costs a fortune when brought out, but five years later it is more reasonably priced.
“The other issue is actually people living longer and claiming more on individual things. If you went back 20 years for example, an 80-year-old probably would not have had a hip replacement. Now they are commonplace.
“So we have to build those factors into our premium which inevitably will mean the premium goes up, but actually people are enjoying the benefits far longer and a greater quality of life later. The issue is to ensure it does stay with the affordability bounds.
“As mentioned earlier, both IP and health are intrinsically bound in that they are about the health of the individual. The biggest savings on premiums can be made by fewer people claiming. In terms of both products there has been an obvious move towards wellbeing.”
