Protection distribution must evolve


July 17, 2012

Mark Jones is head of protection at LV=

The protection gap in the UK for mortality and morbidity products is enormous and the reason for this has been debated at length over the years.

Traditionally people have blamed the low take up of protection products on a lengthy underwriting process, the perceived high cost and consumers’ unyielding belief that providers won’t pay out.

And despite providers introducing ever slicker processes and increased product innovation our industry still struggles to engage people, as the number of people who take out protection has not changed considerably over the years.  

We hone in on what we consider to be the unique selling points of our new products or services and how the new features enhance our proposition but many people are unaware of what the old product did and why it is better than the other product they don’t understand either. 

In fact, many consumers will be unaware of what protection means and how it could benefit them. For most people when they think about paying for protection they think of the Mafia dons not LV=.

In short, although we try to tell customers how much easier it is to take out protection products now, many had no intention of purchasing it in the first place so were never concerned or deterred by any of the ‘problems’ that the industry has worked to address. 

In December the Gender Directive will come into force and the cost of cover is set to rise and rightly so the industry is trying to use this as an opportunity to raise awareness among consumers of the need for protection. 

Whenever the Chancellor announces an increase in fuel duty, drivers try to fill up all their cars before the price rise, and we wouldn’t be treating people fairly if we didn’t point out there is a better deal to be had now than if they wait until after December. 

It is likely that this effective sale will bring forward some protection sales that would have likely happened at a later date but the hope is that we manage to engage some new customers along the way.

At present the industry relies heavily on financial advisers to make protection relevant for consumers but it is clear that the whole industry needs to focus on making protection more relevant and get people to emotionally engage with what protection products are offering them. 

Across the world there are plenty of examples of providers employing different techniques in order to engage customers. In Korea protection is sold on shopping channels and in Indonesia one bank lets consumers choose which regular outgoings on their credit card statement they want to protect. 

With the explosion of the coffee shop culture in Australia we’ve seen a distributor experiment by opening coffee shops instead of branches. Tall skinny latte and some income protection, please?

Another example is in Turkey where you can buy protection from an ATM.

Though I suspect that regulation may be a little lighter there than in the UK where the extent of the ‘small print’ required would lead to a long and fidgety queue but this may well indicate how the industry will evolve: simple, accessible products sold direct to consumers at convenient times when they are interacting with their finances; and more comprehensive products being sold through advisers. 

In the coming years we will see even more evolution in a world of rapidly developing technology and how people buy protection in ten years time will look very different to now. There are exciting times ahead.



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