By Tom Murray, Head of Product Strategy, Exaxe
Open any newspaper and it’s hard to avoid an article decrying the on-going bureaucratic interference in the workplace by health and safety officials. Every day, bizarre situations are trotted out to underline the stupidity of the situation, such as police officers that can’t jump into a pond to rescue a young child because they don’t hold a certificate in dealing with water rescue issues or universities who ban graduates from throwing up their caps afterwards because a student was previously injured by a hat on the way down.
Reading a summary of these stories recently, it struck me that the workplace was the ideal place for health and safety issues to be addressed – but in the form of health and protection life policies, not of workplaces policies.
Protection goes out of fashion
Over the last 10 years, throughout the boom, sales of protection products have stagnated and are still at the actual level that they were at seven years ago. Why should this be so? Protection products are a very cheap and effective way for individuals to ensure their security.
It appears that people are no longer looking for anything as mundane as preserving their current position. They only want to talk about hitting the jackpot – dramatically growing their wealth base as opposed to taking certain steps to maintain their current lifestyle against adverse conditions. Indeed, the Financial Services sector seems to be encouraging investment by trying to peddle the illusion that everyone can outperform the market, although by definition this can’t be true.
Protection too expensive to sell
A new era beckons for the protection industry, once the Retail Distribution Review (RDR) has been implemented. Free from any commission incentive, it may be easier for financial advisers to encourage consumers down the protection route, as for many clients this would be better value and more suited to their long-term financial needs.
The fact remains, however, that distribution costs are very high for these products, given the low margin and this also discourages a more active pushing of these products to the key consumers who could benefit from them – the lower paid. It is generally accepted that RDR will reduce the number of people getting financial advice, which seems to make it even harder for the protection providers to reach out to these clients.
Game changers
Two things are going to dramatically change the financial services landscape over the next few years – auto-enrolment and technology usage. Both these changes will completely alter the protection landscape, resulting in big opportunities for providers who can take advantage of it.
Auto-enrolment
Over the next few years, auto-enrolment means that every company with over five employees is going to have to enrol their staff automatically in a standard pension scheme. There will be between six and ten million new savers suddenly in the market.
This presents a tremendous opportunity for cross selling for those providers who are in a position to take advantage of it. As many of these new savers will be from the lower and middles earning sectors, health and protection products are of far more interest to them than extra savings products. And now, there will be a way to reach this new audience, which has been forced by the government to start taking a long-term view of their own situation and to start to think in terms of providing for themselves.
Getting employers to expand their new pension obligations to allow a fuller employee benefits programme isimperativeto opening up this market. Advice given as part of these programmes will be far more effective than cold mail-shots and can make users think about their responsibility to provide for themselves not just after retirement but also to preserve their lifestyle up until that point. Income protection, life protection and critical illness policies should be a natural fit with the compulsory pension saving.
Technology
The other big change that could help revitalise the protection market is the ubiquitous use of new technologies by the general public, such as smartphones and tablets. These provide the opportunity to reach out to the newly auto-enrolled pension savers and to encourage them to think about scenarios that they had not considered before.
Use of new technology drives down the cost of interacting with consumers and will enable full health checks to be provided and for people to regularly review their level of protection at life changing events such as marriage, becoming parents, or becoming homeowners. Providers wishing to break out of the current stagnation should not underestimate the ability of newer technologies to educate and encourage people to protect their current lifestyles and those of their dependents.
Protection’s time has come
After years of stagnation, government policy and technological advancement have conspired to provide the best opportunity for the growth of both health and life protection market for decades. Whether they succeed or not depends upon the tenacity with which they grab this opportunity and their ability to change both their products and processes to fit a new market that can’t be reached by the existing means.
Providers need to rethink their whole approach to the sale and servicing of protection products in order to maximise what could be a once in a lifetime opportunity to grab leadership in a completely new market. And we could end up in a situation where the workplace is where peoples’ health and safety needs are really taken care of in a positive way.
|
