The future of adviser commission in the protection market maybe under the regulator’s microscope as it continues its long-term vision, according to incoming Aviva managing director of protection Fran Bruce.
In an interview with Health & Protection, Bruce discussed potential changes to Aviva’s pricing, distribution, product evolution and the expansion of its direct to consumer proposition.
And she also revealed the insurer had launched pre-underwriting technology which tells advisers if a case will need further underwriting or likely to go clean through.
Reading between the lines
On the subject of commission being banned, Bruce said from reading between the lines on the Financial Conduct Authority’s (FCA) consumer duty and fair value rules, the insurer was considering this a possibility.
“We’re looking at where will this market evolve over the coming years, is commission going to be a thing forever?” she told Health & Protection.
“When you look at the broader life and pensions market, commission was switched off from pensions with the Retail Distribution Review (RDR) what feels like a long time ago.
“So does commission have a future? I don’t think this is going to be in the next six months, but when you start to think about longer term where could this market go?” she added.
Bruce emphasised she was not advocating a ban on commission or to cull the intermediary market.
“We get 70% to 80% of our business through intermediaries, so I’m not questioning whether they do their job or not,” she continued.
“It’s more that when you look at other parts of our broader industry, commission is not there anymore – so it’s understanding any read across.”
And Bruce recognised that the impact of the FCA’s proposed customer duty and incoming fair value rules might have been underestimated by the sector.
“That’s why we’re trying to read between the lines and plan forwards from this,” she said.
“There’s nothing explicit in the rules, it’s more what the tone is. The consumer duty was life and pensions-wide, whereas fair value rules point a bit more directly into the protection space.
“It’s how these things join together into how the market could function going forward,” she added.
Pricing, products and underwriting tools
For its intermediary offering, pricing and distribution are two areas that Bruce has committed to focusing on initially – with data, analytics and machine learning being a major lever.
“I was working with our data science team yesterday and there’s some really interesting developments where we can improve our pricing position and help make a difference there,” she said.
And extending distribution reach into “underpenetrated areas of the market” is another key aim.
One of these is the SME market for group risk products where the intention is to make the business easier for SMEs to deal with.
On the retail side, Bruce hinted Aviva might follow others by expanding into protection for renters or other lifestyle needs that traditionally have not been covered.
“How do we stay with the changing needs of customers?” she said.
“For example, people are buying their first house later in life and renting longer – they’ve still got a protection need, not buying a property doesn’t mean it’s not there, it’s just a different one.
“Are we suitable or relevant for that market? There’s lots of areas we can push forward.”
The insurer has also recognised the demand from advisers to know sooner if cases will require further underwriting, and so this month launched a trial of a new pre-underwriting tool that aims to give that information at application stage.
“Having those pre-underwriting tools available and useable is important,” Bruce continued.
“And there’s loads in the full end-to-end journey where we want to make it slicker and easier.”
Learning from each other
Taking over both arms of the protection business naturally brings questions about whether there is a plan to merge the two operations, but this does not seem to be the case, at least initially.
Instead, while they will remain largely separate teams, there is the intention to improve communication and learning between the two sides.
“One thing I do want to be doing is learning from each other, so even if we’re not joining the two distribution teams as one, what are the different dynamics of the market that can give us insight from each other,” Bruce said.
“That’s the same for my pricing and commercial teams, for proposition teams and future innovation areas.
“I want us to recognise that individual and group are quite different but understand what the things are we can learn and get the benefit from.”
She also noted that some of group distribution team work closely with the health business, so despite having separate managing directors they will still be working closely together.
Value of added-ons
A key part of the proposition, especially in the corporate area, is added value services and Bruce agreed there was a growing expectation that employers now offer a wellbeing package to their employees and Aviva was having to make sure it offered that.
“But a real core part of how we pitch our business to our corporates is the prevention and early intervention work that we can do – to save the employee going to full claim and how we can get them back healthy and to work sooner,” she continued.
“Add-ons like Digicare which are seen as nice, but with anything like that I think they will start to be seen as an expectation rather than a differentiator.”
In that scenario staying ahead of the curve and recognising the next differentiator is important.
Bruce noted that the data coming from customers already using the system was vital to see what they valued, what was less utilised and what changes or developments need to be introduced.
Direct to consumer expansion
Finally, if the ban on commission were to materialise, one of the key considerations for Bruce is whether Aviva’s direct to consumer offering would take a greater importance.
The insurer secured its first aggregator placement for protection products earlier this year on Compare the Market but plan is to become a greater presence on aggregator sites through its standard and Quote me happy brands.
However, it is through the telephone which the insurer says it has seen most pick-up in direct sales.
“Telephony has been really popular and done well during the pandemic across the market,” Bruce continued.
“In the grand scheme of our volumes, direct is still the smallest proportion, but in terms of value its now starting to take a bigger proportion as the pricing structure is slightly different.
“It’s really good for the customer and Aviva because it doesn’t have the intermediary in there trying to make their margins as well.”
Bruce has since added that Aviva remains committed to the intermediary market as its key focus where the value of intermediated relationships is key for customers in that channel.
