A popular analogy used to highlight the importance of protection cover compares a human being to a machine that prints money, asking the question: if you had a machine in the garage that printed money would you insure it from breakdown?
A quote that has been used to illustrate this - to be exact - says: "You ARE a money making machine. Buy life insurance."
Over the years the value derived from buying any type of protection cover has expanded beyond what happens at the point of claim.
It incorporates a raft of services and offerings to track and support the mental and physical wellbeing of policyholders.
But how well are providers doing to meet and understand consumer needs in what has certainly not been an easy year for anyone.
This report will explore the way changes in the protection market has affected the attitudes of consumers and advisers; how critical illness is changing and how technology can help with the take-up of various types of protection cover.
Most providers offer some form of emotional support service now, and are doing their best to provide counselling and also help to financial advisers, who may be less equipped to dealing with distraught clients.
According to protection experts, advisers and clients are responding well to these additional benefits, although more could be done to promote them.
We seem reticent to tell these stories out loud at a time when we should be telling them
Naomi Greatorex, managing director of Health Protection Solutions, says that recently, while benefits have really evolved, it can be difficult keeping up with all that is available.
“These additional benefits are really changing, for example the AIG Smart Health tool offers a huge range of health and wellbeing support,” Ms Greatorex says.
“Access to a GP service has been launched with insurers such as LV with their Doctor Service and Vitality GP. I have found access here for clients has been very well received, and seen as a real benefit. With Covid-19 people have really suffered with stress and mental wellbeing. Any support and counselling services has been well received during this time.”
Roy McLoughlin, associate director at Cavendish Ware, agrees. He has seen a big change in the last six months with the take up of support services.
The hidden benefits of the policies are coming to the fore for both individual and group policies, but Mr McLoughlin says more needs to be done by providers to ensure that advisers know what is on offer.
If the advisers are unaware then the clients will be none the wiser.
“We seem reticent to tell these stories out loud at a time when we should be telling them," he adds.
“It has been in this period that many people have found out by accident. Clients who have used these services have said it is a Godsend.”
The events of the last six months has certainly led to many more conversations around mental health and people seeking out services that can offer support.
Alun Beyon, protection specialist at Scottish Widows says the company has developed a module for advisers in relation to communicating empathetically – designed primarily for train the trainer purposes.
The module is designed to help advisers in their engagement with vulnerable customers in difficult circumstances such as the prevailing Covid -19 pandemic.
iPipeline has also seen increased use of product features report (powered by Protection Guru) over the last two months as advisers use these ‘lead’ benefits as a key component in advising and selling on protection.
These include: counselling and access to GPs and Health Checks.
The product features report allows advisers to compare product features from different providers on quality as well as price.
Traditionally, protection cover is there to provide financial support when required and the reason(s) for claiming can often cause emotional distress for customers.
Paul Yates, product strategy director at iPipeline, says: “Added value services not only provide a tangible aspect to the policy, in that customers can often use them without having to claim, they can also make the experience more manageable from both the customer, adviser and provider’s viewpoint.
“It’s about providing the best customer experience for consumers so they feel better supported throughout the journey.”
Alan Lakey, director at Highclere Financial Services and CI Expert founder, says for those people making use of them, the services are “invaluable” as they go hand-in-hand with insurance products.
“Because with insurance you are buying an intangible where - let’s be honest - you hope that you are wasting your money. This type of added benefit which doesn’t rely on a claim will be seen as a valuable adjunct,” Mr Lakey adds.
And advisers are finding that when they speak to clients about these value added services, most of the time people are interested.
Ms Greatorex says: “It is important to add value, and to be seen to give advice and support to your clients. The value added services are a way to show your clients that they are not just buying a life/CI/IP cover, but also that there is additional support available in case they need it. Many of these support services can be used regardless of whether or not you are making a claim.”
Added value services not only provide a tangible aspect to the policy in that customers can often use them without having to claim, they can also make the experience more manageable from both the customer, adviser and provider’s viewpoint
However, Kathryn Knowles, managing director at Cura Financial Services adds it can still be a little difficult to gauge interest because some people are not as comfortable as others talking about mental health.
“When it comes to emotional support, people are interested but I think there can still be that subconscious thought of ‘well I won’t need that’ or simply burying stuff away,” Ms Knowles adds.
“Things like remote GP access really stand out to clients, as most can really appreciate how important that can be.”
The services is not only useful for clients but also for advisers themselves.
As Mr McLoughlin notes, being an adviser can be a lonely world.
“We all quite rightly worry about our clients all the time, but maybe we should be more inward looking,” says Mr Mcloughlin. “It has been obvious to me that certain advisers are struggling at this time.”
At Scottish Widows the provider has developed a module for advisers in relation to Communicating Empathetically – designed primarily for train the trainer purposes – the module is designed to help advisers in their engagement with vulnerable customers in difficult circumstances such as the prevailing Covid-19 pandemic.
In the critical illness market there has been something of a conditions race, despite attempts to simplify the market.
One policy might say it covers 52 conditions and another 59. But within all CI policies the three core conditions are still cancer, heart attack and stroke.
Alan Lakey, director at Highclere Financial Services and CI Expert founder, says: “Over the years it has become standard to use a list of conditions to highlight the value of a plan. The drawback is that most policyholders will never have heard of many conditions, such as Devic’s disease, so the extent of the coverage may not be realised.”
And it is not just clients who find critical illness insurance confusing, advisers do as well.
“There are so many differences between insurance companies’ contracts and this can be daunting. …….clients find critical illness wording confusing, with there still being a lot of detail regarding quality of contract and definitions to consider,” says, Naomi Greatorex, managing director of Health Protection Solutions.
She adds the complexity of critical illness contracts has been made simpler by CI Expert which provides a platform that allows the adviser to compare both historical and current critical illness contracts, and compare definitions and their quality.
Kathryn Knowles, managing director at Cura Financial Services, says: “We now have many providers offering core/basic cover and then enhanced cover. You can now sometimes choose whether or not children’s cover is included.
There are so many differences between insurance companies’ contracts and this can be daunting.
“Each of these options can be beneficial for a client, but it does mean that there are even more areas that advisers need to consider when making advice. Is Insurer X’s basic policy, the same as Insurer Y’s basic or is closer to their enhanced cover? Do I add on children’s critical illness cover now as the clients don’t have children but are planning a family in the future? There are good arguments for yes and no on this.”
Simplification or not
Paul Yates, product strategy director at iPipeline, says the race to add more conditions still exists, though notably some providers are trying to step away from this and focus on outcomes.
Mr Yates adds: “The definitions of a claimable event under a condition can also vary between providers which creates further challenges when trying to evaluate one provider versus another. The industry also needs to improve the number of customers offered terms without the need for manual intervention, for example, medical evidence.”
Mr Lakey says the recent developments at AIG is an example of how critical illness definitions have been simplified.
The insurer has simplified its critical illness (CI) cover by consolidating some conditions under four categories. The plan relies on umbrella headings rather than listing conditions.
“A good example is ‘degenerative neurological disorders’,” Mr Lakey says.
“This umbrella heading incorporates many existing conditions such as dementia, multiple system atrophy, motor neurone disease, but the wording enables claims for many rarer but nonetheless permanently debilitating illnesses such as various ataxia’s, Rett syndrome and Alper’s disease.
“The challenge is to simplify a product which by its nature has to use medical terms and is unexciting for consumers to read about.”
Advisers have also commended a number of other providers for developments they have undertaken.
Scottish Widows introduced a body concept back in January where rather than a long list of conditions they based the plan description on sub-categories such as ‘heart & arteries’, ‘brain & neurological’.
Other insurers such as Aviva have combined stroke and spinal cord stroke, traumatic brain injury and hypoxia/anoxia.
Ms Knowles says Guardian also has a really good definition for heart attack.
“Most firms say heart attack of a specified severity, which will mean the troponin levels in the blood must reach a certain reading for the claim to be paid. Guardian just have the definition ‘heart attack’, there is no severity stated.”
Ms Knowles also cites changes that Vitality has made.
She adds: “We would really welcome more insurers doing what Vitality can do, which is to exclude certain groups of conditions for a client with a related risk, rather than just deny a claim.
The definitions of a claimable event under a condition can also vary between providers which creates further challenges when trying to evaluate one provider versus another.
“For example, why if someone has had a recent heart attack, can they not get critical illness cover with heart conditions excluded? They have the same risk as anyone else for getting cancer and it is a shame if they are seeing barriers to protecting themselves and their family.”
Ms Greatorex says changes to some of the top definitions have been really helpful, for example taking away the restrictions around conditions such as Multiple Sclerosis (MS).
“In historical contracts there was a requirement for six months of symptoms, then three,” explains Ms Greatorex.
“Now we are seeing the wording change to a diagnosis and symptom based, rather than a minimum amount of months.
"Changes like these are really positive and help advisers feel confident in the contract they are recommending, and help the customer in getting their claim paid earlier.”
Despite what looks like efforts to simplify critical illness cover, Ms Knowles says there are still challenges for advisers when it comes to selling critical illness cover.
“I don’t think many of the changes have made the cover easier to sell for advisers,” she says.
“Changes in the contracts are generally beneficial in regards to what is covered and the improvement of definitions for making a claim. This doesn’t make it easier for advisers though, we are still faced with the same difficulty of firstly getting a client to understand the importance of critical illness cover, and then getting them to accept the price of the policy.”
Scott Cadger, head of protection underwriting, claims and commercial strategy at Scottish Widows acknowledges the critical illness market is still complex, with a variety of cover available from a large number of providers, even within the providers themselves.
“CI products are difficult as they require a severity to be met to determine payment,” says Mr Cadger.
“Recent innovations have been both around simplifying wording but more importantly an increasing focus on how the cover is explained to customers, whether through visual aids or the rise of CI comparison tools for advisers.”
As underwriting methods try to keep up with changing needs it will be a continual process of both refinement and evolution, although Covid-19 has made providers very cautious.
CI products are difficult as they require a severity to be met to determine payment
Mr Yates says: “Providers are looking at how artificial intelliegence (AI) and alternate data sources can be used to shorten yet enrich the underwriting process while still providing competitive outcomes.
“Underwriting philosophies are being continually refined based on experience and an evolving understanding of risk, and are increasingly using alternative sources of medical detail than just the traditional GP Report where further information is required.”
Protection is seen by many as a product to be sold, not bought, and the sector has suffered from a bad reputation over the years.
But 2019 represented a strong year, with more than 2.1 million policies sold – the highest level of new business since 2004, according to Swiss Re’s latest Term & Health Watch Report, written in conjunction with iPipeline.
While this success is undoubtedly due to a combination of factors, it is safe to say that the publication of claims statistics over the years has helped to build consumer trust towards protection products.
But there was a time when the protection industry - to use protection specialist Kevin Carr’s words - "was up against the wall" on a regular basis for declining claims.
Lack of trust
As these repeated rejection of claims were made public, time and time again by the press, it massively dented consumer confidence.
Additionally, confidence in products like income protection had been massively affected by payment protection insurance (PPI), as many people struggled to see the difference between the products.
Around 2005 the idea was hatched to produce claims statistics for the attention of doubtful minds – consumers, media, and advisers too.
Publishing claim statistics was a phenomenal achievement but it was difficult trying to drag it out of people.
Eventually insurers started publishing the numbers, rising from claims paid rates of low-mid 80s to where it is now in the very high 90s.
Figures released by the Association of British Insurers (ABI) and Group Risk Development (GRiD) show that the insurance industry paid out more than £5.7bn in protection claims in 2019 - a year on year increase of over £470m on 2018 - with the percentage of claims paid rising to a record figure of 98.3 per cent.
And then there has been the Seven Families initiative - a charity-led campaign first conceived in 2014 to raise public awareness of the financial impact of long-term illness or disability.
Seven-real-life families who had lost their income because of an illness or accident were given income protection, including all the additional benefits and followed, as they told their stories.
But to what extent have initiatives like these and the publishing of claim statistics made a difference to adviser and clients' attitudes towards the life insurance industry?
And are there other initiatives that can help?
Roy McLoughlin, associate director at Cavendish Ware and former chair of the Income Protection Task Force (IPTF) which led the Seven Families initiative says: “The claims statistics was a game changer. By not saying anything [previously] it [looked] like there is a problem.
“But [in reality] you are doing much better than everyone perceives and when you don’t pay out, tell people why you have turned it down and actually they [will see they] are perfectly logical and understandable reasons.
Stories make people feel and it is feeling and emotions that stay with us, not numbers.
“So publishing claim statistics was a phenomenal achievement but it was difficult trying to drag it out of people.”
Kathryn Knowles, managing director of Cura Financial Services, argues that claim statistics might help where a person wants insurance and already knows they want it, but for someone who does not want insurance the statistics are less likely to be as impactful.
Ms Knowles says: “You will be met with, ‘okay, 97 per cent of claims are paid, but how did they wangle out of that 3 per cent?’”
“The statistics that we have are amazing, but they don’t win people over. I think the Seven Families campaign is incredible and I have it within our adviser training. [It] hits home the importance of income protection.
“Stories make people feel and it is feeling and emotions that stay with us, not numbers.”
Impact of stories
On the impact of Seven Families Naomi Greatorex, managing director of Health Protection Solutions, agrees: “It is vital that we get the positive message out to as many people as possible regarding the importance of income protection, and the financial security this insurance can provide.
“The Seven Families stories give advisers great real life examples to use,” says Ms Greatorex, who has seen a rise in positive messages around protection products and their value in the national press.
Claims statistics have been very helpful to her in her job as she regularly talks about the statistics in life, critical illness and income protection conversations with clients.
But this year has certainly been a test for insurers, when it comes to claims: facing the unprecedented and unknown challenge of Covid-19 while trying to manage claims and still retain the trust of customers.
It has not been easy.
Industry Covid-19 response
Advisers say the industry has tried to do the right thing regarding the Covid-19 crisis, although some have been slower than others to react and support consumers and advisers.
“Whether or not you think it is understandable or not, the market for unemployment insurance disappeared earlier this year,” says Ms Knowles.
I’m hoping that adviser attitudes to signposting is beginning to change.
“With the amount of claims, potential risks and I’m assuming other factors, the doors were shut to new policies. People were desperately trying to arrange this insurance and when people felt that they needed it, the insurers said no.
“A knock on effect to his has been some of the general insurers that offered this cover, have increased client premiums significantly at the point of renewal.”
According to Ms Greatorex the changing underwriting philosophy has also been difficult, as she found her clients “caught in underwriting with specific medical disclosures now, were unable to get acceptance terms, which was unexpected".
"This has been difficult to manage," she says.
“We have to appreciate this has been a learning process for all. I personally have had clients call and talk through payment holidays and I found the insurance companies we dealt with helpful.”
The protection insurance industry has responded to the challenges consumers are experiencing by offering payment holidays/breaks for clients that need it.
There are also many value added services that insurers are providing to their clients, which has helped during lockdown. Access to remote GP services has been very popular with clients.
Signposting is increasingly also making a difference.
The British Insurance Brokers Association (Biba) worked with the Access to Insurance Working Group to launch a new signposting agreement for protection insurance earlier this year in January.
Ms Knowles says: “I’m hoping that adviser attitudes to signposting is beginning to change. I spoke to someone [recently] who had been told by an adviser recently that due to her mental health no-one would cover her and to go back to them in four years.
“I had multiple options for her immediately and I’m so pleased that she didn’t just give up when she hit that barrier.
“I am a huge advocate for this. If an adviser has reached the limit of what they can do, which is happening even more quickly with stricter underwriting due to Covid, it’s so important that they signpost to an adviser that can help.”
Technology has certainly impacted the take-up of protection cover.
As the risk landscape is evolving rapidly, insurers are responding proactively. As a result, they are taking a more holistic approach to customer risk management, providing policyholders with value-added services, according to a report published last year by Capgemini.
It added: “As industry players evolve from payer to partner and preventer, life insurance companies are increasingly exploring initiatives to monitor, manage, and improve customers’ health, not just paying claims upon illness or death."
Other key drivers of these technological developments are:
The growing popularity of wearables and health-tracking devices has led to increased collection and availability of policyholder data
Customers are also willing to share additional information with their insurers and pay extra for personalised risk control and prevention services
The slow market for traditional life insurance products makes value-added service and wellness products a critical priority for insurers to reinvigorate premiums.
Insurers are also leveraging analytics and artificial intelligence (AI) to enhance the underwriting process.
Improvements to underwriting rules which give instant acceptance means that more people can buy straight away without manual underwriting.
This will appeal to many customers, as the longer the time until acceptance, the greater the customer drop off rate due to the customer losing interest.
Paul Yates, product strategy director at iPipeline UK says: “Technology has made the process of writing protection faster and easier.
“It has also, at the provider end, enabled significant improvements in products – both from extension of propositions and product quality – while retaining productivity (and hence prices).
“This has meant we have seen growth in protection sales as a result of more advisers writing protection for more people. It has also led to growth in the spread of products sold, multi-benefit sales almost doubling in the last 30 months and income protection sales also doubling in the same period.”
Scott Cadger, head of protection underwriting, claims and commercial strategy at Scottish Widows says a lot of new technology has entered the market in the last few years, aiming to support a more rounded decision-making process at point of purchase, whether that be a more informed underwriting decision or understanding the best combination of multiple benefits from providers.
“It has helped to support firms that operate in a more real-time environment, being able to provide customers with a full set of options as the conversation flows,” adds Mr Cadger.
Medical record delays
Despite the improvements Covid-19 has thrown up some challenges, namely the delay advisers and clients have experienced in obtaining medical records from GPs.
Ian McKenna, founder of FTRC, suggests one way to reduce the reliance on information from the GP is for advisers to proactively encourage clients themselves to get copies of their medical records in advance of applying for cover and to also check them to make sure there are no errors.
This could make things less cumbersome when the advisers are liaising with the insurers on behalf of their client.
Mr McKenna says: “It could be easier to access information electronically but we have not yet gotten to that stage. There has not been a level of agreement between the medical and insurance profession on how to do this on a consistent basis, however it is inevitable that more and more patients will start wanting to hold their own medical records.
“Already, if you want, you can hold a copy of your medical records so if you are ever in an accident, the paramedic can access your medical records, which is actually a very sensible thing to do and I think we will get to a situation in very few years where that is the norm for most people. There are certainly positive signs on the horizon but we are not quite there yet.”
Roy McLoughlin says another technology can help with take-up of cover is increased transparency so people can see and be reminded of what they are covered for - using the pensions and investments sector to illustrate his point.
It could be easier to access information electronically but we have not yet gotten to that stage
“On pensions and investments, every company I deal with sends customers an annual statement," Mr McLoughlin says.
“If you take out a pension the pensions company will send you all the information you need.”
Mind the rental gap
Amid all these improvements there is still a group of people which the protection market continues to struggle to attract and that is renters.
The rental community is particularly exposed when it comes to being at risk of eviction if they are unable to pay their rent because they cannot work.
They have no equity and arguably have less room to negotiate with a landlord than a homeowner would with their lender where they fell into mortgage arrears.
It is estimated that around 35 per cent of all consumers, both homeowners and renters, have some form of protection insurance, either individually or through their employer.
When it comes to renters, only 18 per cent of them say they have some protection insurance in place. This is broken down as 7 per cent relating to individual protection, and 11 per cent through their employer, according to figures from actuarial firm Hymans Robertson.
Its study, published last year, also found that only 8 per cent of consumers are being informed about potential products as part of the rental process: “Clearly on its own this is a concerning position, and when we split the respondents by age we see less awareness among older generations, with only 2 per cent being informed about income protection.”
We not only have the ability to deliver nudges in the rental process, but we can also streamline the full protection acquisition process to fit within the faster and more frequent rental process.
But some advisers are employing new methods to try and reach renters - particularly those that use social media.
Mr McKenna says he has seen an increasing number of new generation advisers - predominantly young IFAs - who are using social media in a very “different way” to talk to customers.
“They are making short sharp videos which they put out on social media which speak very authentically to the customer. There’s a protection gap already but in the rental committee it is more than ever,” says Mr McKenna.
“Technology can be used to reach that audience and if that audience is substantially younger people, the question [to ask] is; what is the mechanism through which younger people assimilate information?
“That’s why social media [is a very good tool]."
Mr Yates says iPipeline is committed to enabling 'Generation Rent' – those most in need of protection – to be protected.
He adds: “Renting is an intent-based moment and is increasingly transacted digitally. We not only have the ability to deliver nudges in the rental process, but we can also streamline the full protection acquisition process to fit within the faster and more frequent rental process.
“Technology can also be used to gear processes that meet the various needs of renter cohorts, which are very different.”
Photo by CDC on Unsplash
Photo by CDC on Unsplash