In which MD Andy Couchman shares his thoughts...
17 May 2019
Talking to an actor friend recently, the question came up of retirement. “I just hope I can still remember my lines when I’m 92,” he told me.
It illustrated that, today, the conventional maxim of retire at 65 (60 if you’re a woman), do nothing, then die, is fast becoming a thing of the past. Good!
But look at long term income protection (IP) and, once you hit 60, we’re not really interested in you any more.
It’s not surprising – the incidence of illness and disability rises with age and, once you get to ‘pensionable age’ (whatever that really is) the financial incentive to return to work asap falls away. If you can afford not to work – why would you ever return?
But that ignores the fact that many of us who could afford to retire, choose not to do so. Of course, the argument is not that simple – many who do retire quickly find that two thirds or half salary goes nowhere near as far as 100% did. Especially as they now have more time to spend more money.
But what age, and hopefully a bit of prudent savings built up over the years, does give is choice. And so, for a growing proportion of generation grey, the ideal is earning income but working less, doing more of what you most enjoy, taking more time off to have fun, and using your funds to top-up only as and when necessary.
But what happens if illness or disability strikes? If you have personal IP cover, it could have an end age of 70 or even 75. In practice it probably won’t – an end age of 60 or 65 is much more popular – at least when you’re younger.
A bit of money might be useful. That could be regular income (to supplement your savings) or a cash lump sum or sums (to spend as you wish or need to spend). All that could be costed quite easily and, if the amounts are small enough (thousands not tens or hundreds of thousands), the monthly premium could be easily affordable. Regardless of your age. The traditional disability definition may need to be more objective rather than the current rather vague own occ(upation) definition we’re used to. Is that a problem? No, not if we get the whole package right.
But what then? Remember the brilliant 7 Families industry campaign? Right from the get go my expectation was that the biggest single lesson coming out of the campaign (www.7families.com) would be the value of the third party or added value services we now include on most protection policies – not just IP. That has proved to be the case, but we haven’t really taken on board yet what that really means.
What it means is that the most important benefit from an IP policy isn’t the financial payout. At least not for a growing number of claimants. No, it’s those third party benefits.
Interestingly, AXA PPP is now transforming ‘from payer to partner’, I learned at a recent AMII meeting. I wish I’d thought of that phrase! OK, I’d modify it to ‘payer and partner’ (don’t forget, the public still doesn’t trust us to pay out, even though we do). It’s something the whole industry is migrating towards – and about time too…
GRiD also revealed recently that group risk insurers had helped 3,551 people back to work through early intervention (things like rehab and advice). This was BEFORE they qualified for any financial benefit. Wow…
Back to generation grey. Our 60 year old consultant (or actor!) probably wants to carry on working, but may not know how to achieve that or may need some serious handholding to get her or him back to the best they can be.
The third party service provider is up and running as soon as the claim is reported to the insurer – maybe even before then. Almost regardless of cost, they will start by providing help and information so that our claimant – can I call them ‘customer’ please? – can understand where they are. A second medical opinion may be needed, specialists contacted and rehab and maybe counselling, started. The insurer is partner, regardless of whether it’s payer too.
With little or no claim threshold looming, pressure is off the customer and the ‘partner’ has a free hand to provide a lot more help than might be expected.
The end result may be that our customer decides to carry on working, perhaps helped by various devices, and working fewer hours than before. The local taxi firm is now on first name terms, groceries are delivered not collected, and a relaxing holiday has recharged batteries.
Our customer’s employers or customers still have the benefit of their skills, knowledge and experience and everyone wins.
Sound good? The delivery is and, OK, designing and pricing such a product is not as simple as I’ve made out, but it is do-able. The ever-present issue of selection will be a thorny problem but hey, so is fraud when it comes to banking and credit cards and, when I last looked, that hasn’t stopped new propositions being developed (profitably) and I can’t see that changing.
The big problem though – and 7 Families highlighted this if you read between the lines – is how the hell do we sell this?
It won’t be easy. For decades, we’ve sold protection insurance in a simple ‘it costs you this and you could get that’ purely financial way. Now, I’m asking you to change the story.
That story is maybe ‘if shit happens, we’ll do our very best to help you out of it in the best way – for you’.
Perhaps the nearest analogy is the AA car breakdown service. In the past, our equivalent might have been to only allow perhaps 90% of customers to buy 'our' AA cover (‘people buy on price so we’ll weed out the poor risks’). Then, if your car breaks down, we’d quickly get to you and help 90% of you (did you disclose your car had once failed an MoT, as clearly asked on page 42?). To those lucky devils we’d quickly give you a cheque, smile, and drive off. You’d then have free choice to get your car towed away, fixed or even charter a helicopter to get you to your destination. We’ve put you, the customer, firmly in the driving seat! What service! Hmmm…
But the new protection insurance model will require actual AA style marketing as well as delivery. So, we’ll be the fifth (or higher?) emergency service, we’ll be with you in all weathers (24/7), we’ll offer value for money and we’ll cover all breakdowns in earnings (no smallprint). We’ll need protocols, gatekeepers, and algorithms galore and maybe an independent overseeing body to ensure fairness, but the proposition will be very simple. For the customer.
It will take time though. I reckon about two years of promoting what we offer before it starts getting through to enough people to start paying for the investment. Some insurers who spend most will benefit most or least (as usual) and we’ll agonise over this ‘overhead’.
But we’ll also change attitudes and we’ll create a new market. Oh and it won’t just be generation grey who buys into these ideals, but everyone from babyboomers to generations x, y and z and beyond.
And oldies, such as me, will maybe tell you that this isn’t ‘proper’ insurance and how it was all better in the good old days when we could measure the cost of everything and even con people into taking a commuted value ‘to protect our claims book’, and how we proudly turned away customers who wanted to buy just because we could, and how we made them all squirm when they dared to claim. And if I do – just shoot me!
28 December 2017.
This January I celebrate running my own business for 25 years and it was 15 years since Peter Le Beau and I founded protection Review too. Yippee! Before that I was a senior manager working for a large insurance company, developing a wide range of products, some of which were or became market leaders (and setting up the UK’s biggest mortgage broker, achieved within 18 months of start-up). I was proud of that. Now, I run a small business (and am co-chairman of Protection Review) and created what we now call a portfolio role. I love it and am even prouder of what we have achieved.
But the change in role was significant. One of my first consultancy roles was developing a guaranteed income bond. That meant putting the product together, writing the terms and conditions and much of the marketing materials. Oh, and specifying both the admin and IT and getting the DTI to approve the plan.
I wasn’t sure I could do all that – previously a whole team of people would have taken on each task, let alone all of them. Oh, and we had six weeks to do all this, working just three days a week.
In the event it turned out well, not least because I had a great team around me and, being a much smaller insurer, we could do things quickly and with virtually no decision chain. I was even able to improve on the general market model we followed and to over-deliver on some of the techy stuff in ways I’m still proud of.
What that taught me is that you can do things that are maybe a bit scary when you look at what’s required. If, that is, everyone is working to the same objectives, and you approach problems (issues?) with an open mind and focus on the bigger picture but also the detail.
That helped when, for example, I was later asked to draw up a new style code of ethics and conduct for the CII (and PFS) that had to work in over 100 countries, or when working with insurers to develop their strategy in the protection insurance space.
One of the things I’m most proud of over the past 25 years is product reviews. I must have reviewed well over 1,000 of them since I started in 1994 (wow, that long ago?) and they range across the whole protection space from iPMI and cash plans, to long term care, CI, IP and all those other initials we like to confuse with.
Insurers have mostly accepted my reviews, even if they always tend to believe their product deserves 10 out of 10 (oh and that their competitors’ deserve less than I have awarded…). I’ve even been responsible for a couple of products being redesigned to take account of my comments/criticisms and inspired others to develop new ideas after I’d highlighted deficiencies. Lest I become too big headed, I’m reminded of the PMI broker who said he always read my reviews first (back in the paper copy days) and really valued my comments. He added though, that he rarely agreed with them…
So, what lessons can be drawn from this growing body of work? Presumably, it was all better in the ‘good old days’? Far from it! Products now are, generally, much better put together than in the past and, in particular, they deliver better value and better benefits than of old. We express things better too and genuinely try to exceed customers’ expectations rather than just to meet them. Poor products are rare.
A couple of things trouble me though. The first is that, generally, we are not as innovative as perhaps we could be. That said, we have made huge progress on what may be termed ‘backroom innovation’. Some of the innovation is brilliant, but some, too, is poorly thought through.
In addition, some design teams look more to being clever and getting the headlines right than getting the detail right. Take for example, a couple of insurers that have launched products that are ‘a cross between IP and CI’. Sounds perfect except that what that means in practice is that you only receive a monthly benefit if you can’t work because of a critical illness. As most long term absence is due to other causes (mental health and musculoskeletal leading the way), it means you pay less to get cover that may not pay when you need it. Why would you want that?
Some insurers too have promoted greater simplicity. I’m all for that but not if it means getting less cover without understanding what that means. Even a simple option such as allowing customers to choose whether to include certain types of cover (e.g. TPD or having fewer conditions covered) can mean not paying out to customers who probably most need what our industry can deliver. The analogy is home insurance that won’t pay if the claim is on say the last or first day of the month (hey, it’s only a 3% loss of cover!) or motor insurance that doesn’t pay out if you crash on say the M25. Why would you want that?
Maybe a better alternative would be to start with basic instant acceptance cover, then allow customers to widen their cover once, say, medical evidence arrives and the underwriter can confirm the actual rather than theoretical premium rate. Hard to do? Yes, but do-able and, maybe, better?
These concerns though are the exception rather than the rule. Which brings me to one of the great unfolding success stories – one I’ve certainly tried to support and encourage at every opportunity. That is Help Insurance.
What’s Help Insurance? Well perhaps it’s the generic we could use for the raft of mainly non-financial benefits that can be of such huge value to customers. For example, helplines, virtual GP services, counselling, information and the third party services provided by the likes of RedArc and Grace Consulting to name just two. In the group risk world we use the generic EAP (employee assistance programme). For individuals and families I prefer ‘Help Insurance’.
Think of it as our equivalent of the RAC. There, if your car breaks down the last thing you want is someone to come along just with a cheque (valuable as that might be if the repairs are expensive). What the RAC, AA, Green Flag and the others deliver is help. Whether that’s a roadside fix or getting you and your car to your destination or even helping you work out what you need to buy or organise before a long trip abroad. These organisations deliver help.
That was one of the main lessons from the 7 Families initiative. It showed that, valuable as paying seven families the financial benefits they could have had if they had had IP cover, the help and support they needed to help them live the best life possible was at least as valuable. For some, it even meant help getting back to work – help that otherwise probably they would not have got. That help made a huge difference.
But, good as the growing umbrella of Help Insurance is, we’re not yet very good at selling it.
Instead, the focus is still too much on price (sorry, I know you’ve heard that before…). Comparison sites focus on price (it’s easy to measure) and we struggle to quantify the ‘value’, for example, of a virtual GP service. Is that worth a 1% higher premium or £5 a month or what? Regulation doesn’t help (does it even hinder?), nor does conventional consumerism (ditto?), and a lot of our professional training focuses maybe too much on the sausage rather than the sizzle.
I remain optimistic though that we have the potential both to better market such benefits (and to develop them still further), but also to tackle some of the bigger underlying issues. Such as CI insurance not paying out if you have a critical illness, only some of them (even if that might be 99%!). Or IP cover that just looks, well, too complex, or PMI cover that offers no help when you need uninsured treatment.
Help Insurance will continue to develop to become, well, more helpful. We’ll find the triggers that help people decide they must have it. We’ll use case studies more to illustrate how Help Insurance delivers, and we’ll even develop products where Help Insurance comes first, and financial benefits second (that’s already started too). In doing that, our customers will trust us more, talk about us more, and buy our solutions more.
Over the next 25 years, I’m confident we’ll develop even better solutions than we have today. And maybe we’ll develop better generics or rather build on the ideas we have but maybe use a different platform to develop say true CI cover at last or PMI that also helps you choose the right cosmetic surgery or dentistry.
We’ll make mistakes on the way and go down a few dead ends, but the important thing is that we try, we learn and we improve.
Over the past 25 years change has been at the heart of much of what I do. Some of that has been scary, but much of it has been invigorating. Some has been driven from outside (e.g. regulation), some has been driven by new technology or by new leaders and some has been driven by simply better understanding what customers want. Or, what they will or may want, if we develop it and offer it in the right way.
But, hats off to all you product changers whatever your job role and title. The job you do is really important. Keep on doing it and thinking differently – and better; and I look forward to working with you over the next 25 years too!
5 March 2017. What's in a claim? A lot of insurers and advisers are now focusing on the importance of claims - after all, it's what protection insurance is all about.
So far so good. But, wearing my consumer hat, I'm concerned about some of the messages. Not so much what's being said as what's being read.
Let me illustrate what I mean. As an insurer you might say 'We pay every valid claim'. Great - that says you're not a fraudster. But, what the customer reads is maybe 'We pay every valid claim but we sure as hell will make you squirm before we pay up.'
Not what you said? True, but the subliminal message above comes from years of consumers not trusting insurers.
Instead, one of my favourite messages was 'Our claims philosophy is that we look for reasons to pay.' That much better describes not just that you pay claims but that you have the right attitude - that you really want to pay all valid claims not just that you do actually pay them.
A subtle difference? Maybe, but such differences are important. 'It ain't what you do it's the way that you do it', sang a pop songstress some while back. She's right. So, focus on reassuring not telling, describe what you feel not just what you do, and try to reconcile your approach with what your customers want your approach to be. No customer wants every insurer to pay every claim, valid or not. But we do want our insurers to have the right attitude to claims, and I'm not hearing enough about that just yet. And talk to me if you want to know how I can help you achieve the right mesages.
17 December 2015. How important is detail? I ask this because when reviewing a product recently (and it was a good product so I won't mention names) mentioned in the smallprint was its opening hours. They were wider than the traditional 9 to 5 and on the face of it this was a positive customer benefit. However, elsewhere in the T&Cs were the opening hours for claims. They were MUCH shorter. Now, is that because that line is manned by carefully trained experts who are empathatic as well as skilled? Or is it to discourage claims because, 'everyone knows insurers don't like paying claims'.
I know it's the former but do their customers know that? It's a simple matter - trivial even. But why not explain it and 'sell' it rather than it leave it to customers to wonder why and perhaps draw the wrong conclusions? I haven't mentioned it to the insurer, for fear that they'll see me as nit picking. It certainly didn't influence my review. But what should I have done? Hmmm...
28 July 2015 What has more than quadrupled in price since it was first introduced in October 1994? In a few months' time it will be IPT - Insurance Premium Tax. Yes, back then it came in at 2.5%, where it remained until April 1997, when it rose to 4%; then up to 5% from July 1999, and finally to 6% from January 2011. From November it will rise by 58.3% to 9.5%. Ouch.
Research by Consumer Intelligence published today found that of over 11,000 home and motor insurance customers, 21% said the rise would result in them reducing some cover, while 5% said they would cancel cover. They won't - you have to interpret research findings, not take them as gospel - but the findings are worrying for health insurers.
Products such as private medical insurance, health cash plans and dental insurance are all subject to IPT and providers are worried. Already financially marginal products could tip into loss, portfolios will be 'right sized' (do we still use that phrase?) and insurers will either take the hit (and look to cut claims costs and/or cover levels) or raise their prices and look to sweeten the pill by adding low cost, high perceived value benefits. Larger employers will look at medical trusts and high excess products or simply for a 'third way'.
So, should we be depressed? Far from it; this is an opportunity and the smartest insurers should come out of IPTgate (sorry, another cliché - I'll try to stop, but these things are addictive if you're a marketing consultant) better positioned than before.
We had something similar back in 1984 when the Government suddenly scrapped tax relief on life insurance premiums. What did we do? Well, first we panicked (my marketing director in the insurer I then worked for asked me if I had updated my CV yet - I think he was joking...) then we got on with working out what to do. It was an exciting time (hmmm...) but we developed better products with appeal that didn't just rely on tax relief.
Similarly for health insurers the challenge should be how to make their solutions more appealing, not just 'how can we minimise our losses'. Separating 'insurance' from 'club' benefits (after all, we still often call customers 'members') will be one option but there are many more. Some of the options are set out in the PMI chapter of our recently published Protection Review online book (www.protectionreview.co.uk).
What's needed is to look at those opportunities through fresh rather than tired eyes, to rule nothing out (initially - the focus comes later) and to reaffirm the core appeals of the products that need attention. It's the kind of challenge that good product marketeers relish (although it doesn't always feel like that at the time). So, back in 1984 we embarked on a range of ideas that led directly to the birth of critical illness insurance and to a revised interest in income protection. Not a bad result coming out of an 'issue'.
Where will IPT's big hit take us? That's not clear yet but, get it right, and the sector has probably just received a much needed kick up the backside. Sometimes, you need adversity to thrive. Think of it as the Churchill spirit. Not a bad thought, given it was 50 years ago this year that the great wartime leader died.
One final thought. Life insurers now need to tread very carefully to ensure that IPT doesn't get added to their products too. Impossible? Look internationally and you'll see lots of evidence of where something similar has happened. We don't need it in the UK, it would damage welfare and employee benefit reform and it would be counter productive. No one likes higher taxes, but the best time to lobby against them is always before they are introduced, not after.
So, let's manage the IPT 'issue' intelligently and calmly. Above all, let's remember that it's innovation that drives our industry. Let's make it happen.
If you have any queries or wish to make an appointment, please contact us:
Andy Couchman, Bank House Communications Limited, Bank House, Great Rissington, Cheltenham, Gloucestershire, GL54 2LP.
+44 01451 821982 +44 01451 821982
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