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Special Feature: Protection – what’s the price of innovation?

Sam Cordon

October 4, 2013

This question occurred to me whilst watching a presentation at a recent industry event. An interesting and stimulating talk from someone outside of the industry got me thinking; do we actually innovate and indeed, do we want to?

Firstly, let’s get some definitions out of the way. To innovate will mean something different to everyone but for me it’s simple; to do something which people didn’t think was possible.

So innovation in insurance; does it exist?

For recent examples of true innovation I’m thinking of smartphones with touchscreens not buttons, I’m thinking diesel engines which out perform many of their petrol counterparts. I’m not thinking insurance.

Why? Because to be frank consumers aren’t really that engaged with what we do. They have limited expectations based on both a lack of knowledge and also a lack of enthusiasm for buying insurance so is it possible to convince them that there is such a thing as an innovative protection insurance company? I’m not so sure.

But that doesn’t mean that good things aren’t happening within the protection insurance market they just might not be perceived as true innovation by consumers. Let’s explore an example.

Income protection insurance has had an age-old problem with financial underwriting at claim which can mean that policyholders get less benefit than they have paid for if their income has fallen since they took out their policy.

This scenario is quite possible and indeed common for the self-employed so it’s not an isolated problem.

Until relatively recently this was something that policyholders and advisers just had to live with – there was no alternative. All income protection policies included features that meant to make sure a policyholder’s income was high enough to support their benefit, they had to increase and decrease cover on a regular basis.

But this is no longer the case. There are now a couple of good examples of policies that include features to eradicate this problem one of which belongs to us.

Innovation or improvement?

Okay so within the industry this type of development may be regarded as an innovation but to those we need to appeal to it’s likely to have attracted far less interest.

Why? Because insurance isn’t something consumers have a perception of further than simply “it should pay out, no questions asked when I make a claim.” Okay so consumers may appreciate the glaringly obvious points of their contract but the finer details are likely to pass them by. Most of the time these finer details are the things we as insurers are able to improve or develop.

So should we still try?

That was the next question that came to my mind; should we try to innovate (or improve) if consumers won’t notice or care?

Simply put the answer is yes. Just because it won’t be noticed doesn’t mean it isn’t the right thing to do. There are undoubtedly ways we as an industry can improve the products we offer and the way we explain them. Whether these improvements (or innovations) are noticed is beside the point; any consumer-focused industry should do the right thing by their customers.

The vision for the future should be one of an industry that has committed to customers and become more and more relevant over time.

To do this I would argue that we should focus our developments on areas that cause the most frustration. With this in mind surely it is a bit backward in 2013 to still be talking about policies taking days to be assessed and underwritten when it should really take no more than a matter of minutes.

So if we really want to innovate shouldn’t we be doing more to make the process of applying for a policy more like buying something on the high street? I would argue that the most powerful thing we could develop as an industry is the ability for consumers to buy policies and use them with the minimum of fuss.

This means finding ways to simplify the processes we use internally and crucially evaluate how we use technology to engage the public and make protection accessible to all, regardless of their level of interest in the subject.

For examples that it can be achieved we need look no further than the aggregators like Go Compare or Moneysupermarket. They have changed the way that millions of people go about buying various forms of insurance by making it simpler and quicker to access.

It has even bought them the right to invest millions in TV ad campaigns featuring a raft of strange creatures and characters.

As annoying as they may be these adverts are a sign that the public have accepted comparison websites as the norm in today’s society. Now I wonder if a well-known meerkat will ever reunite with his long-forgotten protection cousin?


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