When Neil Armstrong took that giant leap for mankind in 1969, it was the man from the Pru and other similar organisations who championed sales of Life Assurance for most of the general public. The agent would collect money from the customer, mark a premium receipt book (usually weekly) and the client was covered for usually quite a small amount of life assurance - but enough to cover funeral costs and possibly some of their mortgage…it was a massively labour intensive process!
46 years on, Tim Peake is now in the International space station and is the first ever professional British astronaut. Technology over that time has brought major changes to the way we do everything. Advances in medicine have seen life expectancy ages rise from around 71 to 81 - which, as we know, has brought its own challenges to the medical profession as well as the life assurance industry.
These advances have made actuaries completely review pricing models because as we live longer, the likelihood of contracting life threatening diseases increases also. If we look back at the strides made, it is incredible to think that back then, pioneering activities at the time such as heart surgery/transplants are now the norm. We could cover pages and pages of such advances, however the key point here is how sales of life assurance and associated products have not necessarily kept pace with either consumer requirements or the need to take out cover to take account of modern demographics.
As an example, looking at stats from the year 2000 (meaningful stats are difficult to come by prior to this), there is relative proof of the much talked of “protection gap”. In 2000, 2.76m Life Assurance policies were sold in the UK. In 2014, that figure was 2.36m. Over that same time period the Annual Premium Income was £1.038bn (2000) and £883m (2014). This represents a fall over that period of c.15%. Digging a little deeper, in terms of sales by product type the figures show:-
- Whole of life: Sales fell by 34.6%, with premiums down 2.8%. Of the 321,000 sales, 256,000 were guaranteed acceptance (funeral) type plans.
- Term: Non-mortgage term fell by 20.1% but mortgage-related sales rose by 7.4%.
- Income protection: Sales fell by 18.5%, but new annualised premiums stayed at £40m.
- Critical Illness insurance: Accelerated/rider CI sales fell by 17.3% after rising last year.
If we look at liabilities over the same time period and ONLY consider the Mortgage Market lending in the two time periods, it was £119.8bn in 2000 and £205.6bn in 2014. If we consider mortgage sales to be linked to life sales, we see that lending increased by 72% life products both in policy numbers and API fell. To further support this, the UK working population grew by c.14% over that same time period too which in itself should have created further demand. The burning question therefore is why this should be the case? Where does the burden of responsibility lie for the shortfall?
- Is it the unwillingness of Providers to change Products/processes to fit the modern era?
- Is it the sheer number of advisers who have left the industry for one reason or another?
- Is it the lack of customer awareness pf the need for Life/Income Protection Cover?
- Is it the time it takes to sell life cover in the post-MMR era?
There is little doubt that consumers are getting more used to services that are tailored specifically to them, and this will only continue to increase. However, insurers historically tend to have one product that is expected to fit a potential audience of 20-30m people - products are largely generic despite aiming to protect people with varying circumstances. Since Providers hold a lot of data about their customers, in the future could they possibly look at someone's salary, mortgage, debts and family situation and based upon all that information and say here's a product created just for you?
The panacea may well be a point when all of that data, along with wearable technology, online banking and medical information all meet up in a cloud based e-world where different benefits are put together, priced and sent as a 'buy now' pre-underwritten option straight to your phone, tailored specifically for you and your family - because they already know what they need to know.
However, this is something more for the future…if we bring it down to opportunities for advisers to increase their Protection sales penetration in 2016 where are we?
AEGON have enhanced their shortened application product SIMPLY LIFE to just 9 questions and it can all be done online -therefore if your clients…:-
- are aged between 18 and 49;
- are looking for up to £500,000 life protection (including any existing cover, but not including any employer death-in-service benefits they might have);
- aren’t heavy smokers;
- don’t drink excessive amounts of alcohol;
- don’t have a BMI of 37 or over (if they’re aged between 18 and 34);
- don’t have a BMI of 39 or over (if they’re aged between 35 and 49);
- have never used recreational drugs;
- haven’t travelled or lived outside the UK, Western Europe the European Union (EU), USA, Canada, Australia or New Zealand for more than 90 days in the last five years and have no intentions of doing so; and
- haven’t been diagnosed with, investigated for, or received medical advice for any serious medical conditions, such as cancer, heart attack, stroke, multiple sclerosis, etc.
…Then they are eligible for the product which will be immediately underwritten. This means that the normal time to complete an application and wait for acceptance will be significantly reduced, thus breaking down that 'time barrier issue' considerably.
Legal & General have also been pushing back the frontiers to speed up the process. They have further enhanced their on-line application process, making it even easier to transact protection applications, including:-
All of these initiatives speed up the application process, which helps saves time for both advisers and their clients.
- The introduction of on-line consent, allowing applicants to give verbal consent and taking out the need for a signature for GP report consent.
- They are the first company to introduce iGPRs, enabling those surgeries that have the relevant software to be able to send GP reports quickly and securely.
- They have also introduced mandatory consent, which means we do not have to go back to customers for consent if it is required later in the application process.
Royal London also have significantly smartened up their underwriting process post the re-brand from Bright Grey/Scottish Provident. Their new quote and apply system makes doing business easier and faster, with;
- Fewer, more relevant questions
- More instant decisions
- New dashboard
- Client can enter personal details online
- Indicative pricing for those apps that go to underwriting
They have also improved their income protection cover:-
- All own occupation, so better quality cover
- 8 week deferred period added because this is popular with clients
- Broader age and term limits because people work and live for longer
Royal London say that not everything has changed. The things advisers told them they liked remain, so they still offer a dedicated case manager and underwriter, great business development support and of course the Helping Hand service is now part of any Royal London menu or relevant life plan. Why not take a look at their new adviser site?
So we can see that insurers are taking real practical steps to change systems and processes to help advisers overcome the dreaded “time barrier” issue when it comes to writing Life Insurance and are becoming more innovative with their solutions.However, one criticism is that the industry hasn’t really done enough to promote the need for cover and has left it to advisers to do that with their clients individually.
2015 saw the launch of the 7 families campaign and AVIVA as one of the supporters have done much to try to support intermediaries in developing awareness for the need for cover. Whilst research suggests that 50% of people think they only have a 1 in 10 chance of being unable to work due to disability, the reality is different - disability – or illness – can strike any at time, without warning. Last year, 2.2m people were off work for at least six months because of sickness or disability and 16% of the working age population suffer from a disability which stops them working. So, clients need to be prepared. However, less than 1 in 20 adults have income protection. And worryingly, research also suggests that only 4 in 10 know how to protect their income in case they can’t work due to ill health. This, together with the shift in responsibility from the state – and employers – to individuals, means it’s more important than ever to work together to raise awareness of income protection.
For those who are unaware of the 7Families initiative supported by AVIVA, amongst others, click here. It shows the worst can and does happen. 7Families is a charity-led initiative designed to show the very real issues families face when a breadwinner is suddenly unable to work. By using real families facing real problems, the campaign proves, without doubt, that sometimes ‘it’ does happen. And when it does, without the right protection, it can be financially and emotionally devastating to lose an income.
The campaign is paying seven families – who hadn’t taken out income protection – a tax-free income for one year to give some idea of the difference a policy could make. Of course, the monetary support from an income protection policy can have a huge impact. It takes away worries about being able to make ends meet. But it’s not just about the money. What the 7Families campaign shows is that having cover gives your clients so much more – from someone to turn to for information and guidance to the provision of specialist equipment and training on how to use it. The inclusion of rehabilitation and counselling services linked to a range their products also means that an income protection policy can help your clients get back to work.
So where are we in determining why Life Assurance sales continue to drop? And, are we any nearer solutions to support intermediaries to help arrest the decline? Some Providers are working hard to improve processes and change perceptions, but what of increasing sales in 2016 and bucking the trend that has been with us since Neil Armstrong made that giant leap for mankind? Consider these seven questions:-
- Will the Seven Families initiative turn more advisers on to IP?
- Do we need more Industry training/support to turn more advisers on to selling protection, as well as helping with the practicalities of being successful in this market?
- Will a stronger economy drive consumers to want to look at protecting their families?
- Will Pensions auto-enrolment help raise interest in group risks and show individuals the value of protection?
- Will the growing Mortgage Market have an impact?
- Will the simplification of Products/underwriting have positive effects on sales?
- Will the issue of greater State austerity finally drive consumers to seek alternatives?
The reality is, that short of the panacea of tailored products mentioned earlier, the responsibility of increasing Protection Sales will rest with you...the professional adviser...reviewing client needs and adding real value to your relationships with them, never missing an opportunity to offer advice and sit back knowing that you have done everything possible.
Whatever Providers do to help you speed up the process, reduce costs and raise awareness of the need for cover, they know that they need the support of the intermediary market.
It is only you who can answer the questions posed above relative to your own business, but it’s worth thinking that 2016 could be the year you “reach for the stars” in driving protection sales in your own business and take “one small step” to bridging that Protection gap.
You should have recently received an email regarding aligning your General Insurance agencies to Paradigm, so that you can earn more per case on your GI business. By doing so, we will start to earn an override on this business, which we will share 50% of with you via our Annual Rebate scheme. Overrides can be also earned on GI referrals to our trusted Partners as well. In order to align your agencies to Paradigm, we would ask that you email email@example.com and we will recap the process.
As ever whatever we can do at Paradigm Protect to support you in that please let us know. If you wish to know any more about any of these changes or you wish to view any aspect of the Paradigm Protect proposition, please visit www.paradigmprotect.co.uk where you can also find all the Provider specific information you require. Alternatively you can call Mike Allison on 07775 690340, email firstname.lastname@example.org or call the office on 0121 781 7337.
Have a safe and enjoyable Christmas and a happy but more importantly healthy New Year.