Recent protection market entrants can be confident that independent financial advisers (IFAs) will afford them at least a cursory glance at their product offering – but they know it takes more than good looks to make it in the world of protection. IFAs are looking for affordability, previous history and innovation.
Scottish Provident director of product marketing and development Nick Kirwan warns new entrants to the protection market that IFAs look for stability. They want a protection insurer “who will be there in 25 years’ time”.
He says: “I welcome new entrants into the market because it brings more competition and keeps policies sharp, diverse and innovative. This means consumers get a good deal.
“New companies need to keep up with the market because medical science moves on. Policies need to be up to date.”
But he acknowledges that “it takes a while for new entrants to build up a track record”, and stresses his comments do not apply to any one company.
Before a new protection product arrives on the market it must undergo research, in which IFAs and other industry experts are involved.
Scottish Life is still going through this research process but is aiming to release a new product later this year because of the success of the protection market.
Product development and marketing director Roger Edwards says: “We’ve been given a clean sheet of paper and the bottom line is that the UK population is vastly underinsured. People have bigger debts to match their lifestyles and big mortgages.”
Edwards promises that when the final product is launched the business will cut down on red tape, change the culture of the company, deliver on promises and keep things simple.
He lists a range of sources from which to collate ideas, including IFAs, reinsurers, government, academics, market researchers, market analysts and management consultants.
But another channel of research is the “outside world”. By this, the insurer means it is talking to industries other than insurance to get ideas on how they do things. For example, if a magazine’s layout looks good and is successful then it could be applied to make Scottish Life’s protection literature more attractive.
Banks and other organisations are being approached for ideas on how people apply for various products.
Product marketing manager Lisa Mowbray says: “Essentially, it creates freshness in the thinking. We’re looking to improve the services because if an IFA has had a bad experience with an insurer it can affect the future relationship.
“Also it’s not always about price. The majority of IFAs look at the whole package. Usually the end-to-end process is the same, but with different insurers you get a different experience. We’re trying to come up with a breath of fresh air.”
IFAs are confident the Scottish Life product will be a success because of the company’s background in pensions and investments.
Phil Calvert, the director of Training Strategies, a training company aiming to help IFAs sell more protection business, is confident that Scottish Life will be “fantastic” once it has established its credibility as a protection provider on the back of its strong pensions name.
But he observes there have been fewer innovative ideas of late in the market and says Scottish Life must come up with something clever.
He says: “There’s no point being innovative for innovation’s sake – it doesn’t fool anyone. Anything that helps IFAs sell more and makes clients say, ‘Yes, I’ve got to have that,’ is a good thing.”
On the critical illness (CI) side Calvert does not think IFAs are impressed with additions because the majority of CI claims are still for heart attack, cancer and stroke.
He says: “CI providers seem to be trying to outdo each other by stuffing as many illnesses in as possible. Next there will be payouts for ‘spinach in teeth’.”
For income protection (IP) too Calvert suggests providers should give out a positive but simple message as the product is still thought of as being “complicated”.
He advises: “Product providers need to get across as powerfully as possible that it is simple to understand, and that if there is a claim it will be paid with the minimum of fuss.”
Kim Denham, an associate director at intermediaries Alexander Forbes, says new entrants need to find something substantially different to the products already on the market. She cites cost as a major consideration because companies are “cost driven”.
She notes that IFAs are impressed with a provider’s internet facilities so they can follow a client’s policy.
Denham says: “We always look at new products on the market. Our actuaries research the products before we can sell them. They look at the provider’s background, stability and the product because you can’t just start running on something that’s low in cost.”
Brian Wilson, the Milton Keynes branch manager at LifeSearch, says his firm looks at all the products on offer but if the insurer has a background such as Bupa or Scottish Life they are more likely to do well.
Bupa has already cut its teeth in the protection market but is trying to grow its presence by recently launching a flexible protection product.
Brian Bartley, the head of Bupa health assurance, says IFAs and consumers were consulted prior to the launch. He says: “We are becoming a recognised player and our product set gives us a foothold. We were aware that our products needed improving if we were to develop further.
“We recognise we have a broader responsibility to the policyholder than just paying the claim. We now offer clients the Healthline service, which is a 24-hour advice service on health matters, and also Best Doctors, which locates medical specialists around the world.”
Wilson says a product is likely to be unsuccessful if the company is not well known, or its products do not appeal to IFAs. The claims history and financial security are components that would instil confidence in the product.
He says: “We deal with bigger companies because of what they include in terms of add-ons like guaranteed insurability options. This is where the insurer will insure a client who is already ill, but this is quite rare among insurers. Another good thing is the range of critical illnesses to the policy. If the insurer offers limited cover we wouldn’t use them as much.
“Some companies are quite expensive and unjustifiably so unless they have something special in the product. Not every company offers children’s cover. Legal & General includes guaranteed insurability and children’s cover at no extra cost.”
Wilson cites quality of service as another component. With a new insurer he is wary of the underwriting. If there are only one or two underwriters they may not be able to deal with the level of applications that come in. An established company will know how many applications are likely to come in.
He says: “New companies in the protection arena cannot be innovative with life cover but with CI they can afford to be more dynamic. But insurers are putting protection all in one product so there is only one premium to pay.
“But I think it’s better to take out separate cover for life, CI and IP all with different companies because it works out at better value and some insurers are better at CI than IP, for example.”
Ruth Whitehead Associates principal Ruth Whitehead believes insurance companies could innovate by stopping their prejudice against insuring single men who are gay. For clients in this group there is an automatic hiking of premiums among all protection providers.
She says: “I’m surprised there isn’t an understanding that the rise in Aids and HIV is within the heterosexual community. The key factor is sexual practice not sexual orientation. If insurers want to be more innovative, perhaps they could do something about this.”