In this second article in the “Advisers’ Voice” series, Dr Rebecca Sheils, co-founder of the Beddoes Institute, takes a deep dive into the product innovation ideas for life companies put forward by advisers in a recent Beddoes Institute study concluded in February 2016. Not surprisingly, simple products with lower premiums remains a leading area of focus...
While the recent Beddoes Institute’s Adviser Experience Benchmarking study evaluated life company service performance, this study also asked advisers “What is the most important type of product or service innovation you would like to see from Life Insurance Companies to help you with your business?”
simple products with competitive and affordable premiums are most sought after
In the first article, the innovations suggested by advisers were grouped into five cohesive and actionable themes based on how often they were mentioned to produce the following 2016 ‘Innovation Agenda’ for Life Insurance Companies. Product innovation was the most common theme with 49% of advisers calling for this.
So what product innovations do advisers want? The following chart shows that simple products with competitive and affordable premiums are most sought after followed by loyalty and lifestyle reward programs.
Here are some examples of what advisers said within each product category:
Simple Products With Competitive And Affordable Premiums
- Competitive premiums compared to cover offered under industry super funds that are not underwritten at all
- I would say make products more basic, what I mean is by striving for research points the products now cover too many things and are now becoming more expensive so going back to what they were set up to originally do would be a big plus for the industry.
- Insurance needs to be understood by the client and it needs to be affordable and accessible.
- More sustainable and affordable policies. They cannot continue as is. Pricing needs to be reset to affordable levels and this could come about by more basic style policies and not being governed by research houses. The attempts by all insurers to try to achieve higher rating scores has led to policies that are too generous and now becoming too expensive.
- Shorten PDS’s in KISS language. There’s too much jargon for clients to understand.
- Simplified products and processes where you pick what you want / need with the click of a button. Too many product variations complicate the education of advisers and clients and are hardly ever discussed as a result.
- Comprehensive policy definitions in key claims areas – not ancillary so much – with premiums still reasonably competitive.
- Consistent product terminology and features across the industry.
Loyalty, Health and Lifestyle Reward Programs
- Discounted premium for longer term clients, may stop churn. Other rewards for long term clients like smaller premium increases.
- Enhanced lifestyle link to insurance premiums.
- Every insurance company needs a program similar to AIA’s vitality program. If they are serious about reducing claims, then this ongoing program, which offers discount for continual good health initiatives, is critical.
- I would like to see a product which is more flexible in its pricing structure very similar to the new car insurance company ‘Youi’. For example you need to have more variable pricing with smokers, those who only smoke socially (a few cigs) compared to a pack a day smokers. You need to have a reduction in the price if you have a back exclusion or any exclusions.
- If a company could somehow reward clients for staying on with them that would be excellent. The adviser could also be rewarded for having loyal and ongoing clients.
- Providing a refund of premiums of 1/3/10 i.e. 1% after first year, 3% of total premiums paid over 3 years and 10% of total premiums paid over 10 years.
- Reducing ongoing premiums to reflect no claims.
- Reward healthy clients with discounts on their premiums.
- Underwriting based on clients lifestyle and fitness.
- Bring back the old style life products that give back some of the premium to a client who does not make a claim and holds the policy for 10 – 20+ years.
Fixed Premiums
- The key issue here was providing real premium certainty for set periods of time as there is a strong sense that the premiums charged drive a client’s perception of value. True level premiums, so the client can be sure of the premium over time.
- Good stable product that discourages enticement to move without a very good reason.
- A premium lock feature, similar to a rate lock/fixed rate for loans. So the client could elect to lock a level premium for say 2, 5 or 10 years etc., or lock in agreed projected stepped rate increases over that time period.
- Fixed premium for a set term e.g. for say 5 or 10 years, to give the client certainty. Then the premium could go back to “stepped” or underwritten again. Even level premiums go up as has occurred recently. I think they already offer this in the US.
- I would love to see a fixed price/fixed term insurance product that gave clients real certainty of premiums – unlike level premiums that can be increased by the insurer.
- Level premiums which can’t be adjusted due to re-rating of risk books. Level premiums are often hard to sell because they are so much more expensive initially, and being able to say that if you don’t increase your cover, the premiums won’t ever increase – would make it an easy sell. Having to add “unless the insurer re-rates their book and raises premiums” makes it a very hard sell.
Products Tailored to Older Clients
- Insurance for older clients – so many go through divorce and have to rebuild life (often with debt). They need to work for longer, yet many insurers don’t offer income protection after 59, and level premiums are not an option, even if they’re going to work until 70.
- With ‘work life’ being extended, later entry ages and longer benefit terms increasingly necessary.
- Provide products for an ageing population by increasing entry age limits and boost product innovation with greater life expectancy considerations.
- Suitable insurance options for clients aged 55-70.
- I would like to see more flexibility with level and stepped premium options within the one policy or even level premium contracts that go to age 55, age 60 and age 70. Level premium contracts need to be more flexible.
Flexible and Better Structure Products
- I would like to see a life insurance policy which has the ability to be paid out as a lump sum or an income stream, or both.
- An income protection product option to exclude mental health cover in exchange for a significant reduction in premium.
- Retirement income products are key in the future. Combined annuity & market linked products will deliver what retirees both want & need – security with flexibility.
- It would be great if we could get a wholesale insurance product where the adviser can dial up or down their fees, and have these packaged into one simple premium payment from the client.
Dr Rebecca Sheils is Director and co-founder of the Beddoes Institute, which specialises in delivering research and consulting services to the financial services sector.
The Life Insurance Industry Performance Barometer delivers insights into the needs and expectations that advisers and customers (policyholders and claimants) want from life insurance companies and maps how companies perform in terms of meeting these needs.