The protection industry should be engaging consumers by implementing an initiative like auto-enrolment, delegates at the annual Gen Re conference heard yesterday.
Speaking on behavioural economics, Alan Newman, chairman of the Finance IT network said: "The status quo effect [on consumer behaviour] is really important and that's the thinking behind auto-enrolment."
Newman had warned "consumer reality" often passed by the insurance industry and its regulator.
He told delegates: "As an industry you're not typical of the market you're serving. [You have] lots of assumptions about the way consumers operate that are invalid and are reinforced by the people you work with."
By 2018 every eligible employee will be enrolled in a workplace pension under the auto-enrolment initiative. Newman said aspects of behavioural economics proved that auto-enrolment, if modified for the protection market, would engage consumers.
"The combination of hyperbolic discounting, the status quo effect and the optimism bias, means The Financial Conduct Authority and [the industry] should be focussing on auto-enrolment for protection. It's good for the economy, good for society and good for consumers. Forget trying to sell it, just go ahead and do it, it's a much better way" he urged.
To fuel this, he recommended for the industry to revaluate its jargon and the way products are framed for consumers. The term protection needed a rebrand as it was too confusing for the public to understand, he said.
Newman added: "If you really want to start connecting with people, regenerate the name. Protection is such a naff name. If it's real, it means it doesn't happen to me. That's what protection means. If you called yourselves the ‘financial rescue service' that would make a lot more sense.
"First of all, it would be easier to understand, customers would get that. Secondly, if you search the word protection online, you should see what comes up.
"You need to think about how customers are thinking rather than how you want us to think."
