There is little differentiation between protection products at present so insurers will need to stand out in the market on service level, according to Debbie Kennedy, chief executive of LifeSearch.
She also highlighted that the sector appears to have missed the opportunity to grow despite more people being aware of the need to protect themselves from the pandemic.
In the first part of an extensive interview, Kennedy (pictured) spoke to Health & Protection about the state of the protection market, the need for innovation in technology and product development, and improving underwriting without GP reports.
Kennedy described Canada Life’s exit from the individual protection market and Aviva’s slump in sales over the third quarter of the year as “worrying” as the protection sector has failed to effectively capitalise on heightened interest in taking out protection cover due to the pandemic.
“If we were ever looking for a reason to be relevant, then people thinking of their mortality and morbidity on a daily basis was definitely a reason. We just haven’t seen us carry that on. That’s a missed opportunity for us as an industry,” Kennedy said.
“I think with Canada Life leaving, I hope we’re not seeing another round of the consolidation we probably did see 10 years or so ago where a lot of insurance companies got bought up or did go to closed books. I think that’s a worry for us.”
Very little product differentiation
According to Kennedy, the sector is starting to see a “real commoditisation of insurers”.
“There’s very little differentiation in terms of their proposition,” Kennedy continued.
“Very much, all of them offer the same type of offering and even where a couple of years ago, they would differentiate on value added benefits – GP services, second opinions, rehabilitation, mental health, they’ve all got these. There’s some great offerings but they have all got it.”
And this has left Kennedy to conclude that insurers will likely differentiate their offerings on service levels.
“For an adviser we want to understand how well we can convert a policy so I think it’s going to be service conversion and brand,” she added.
“It’s going to be that consumer reaction to the brand of the insurer. But in essence, I think we’re finding quite a commoditised market now.”
Improving underwriting processes
In terms of service levels from insurers, Kennedy contends that the biggest issue for the sector is around the underwriting process, improving application forms and finding alternative ways of collecting patient information.
“Can we improve application forms, really start to improve that once and for all? Can we only ask the questions that are relevant, and avoid these awful long winded questions that cover every disease known which it’s unlikely you’re ever going to have suffered from?
“That’s a big thing. I think we need to get together as an industry.
She also urged the industry to look at alternative ways to get information rather than GP reports.
“We know they can take weeks to come back and this is the service issue that we have at the moment,” Kennedy continued.
“People aren’t getting to see their GPs in the way they traditionally did. We’ve seen something recently that over five million people are struggling to get face to face appointments, seven million people are on NHS waiting lists.
“We have to now start thinking about a world where our customers probably have got some conditions but they can’t tell you about it in detail because they’ve not yet had a diagnosis.
“They don’t know if they’ve had the right treatment plan and rather than trying to wait until they get this information, can we find better ways to get this information, whether we do more medical testing or use other proxies for these underwriting questions?”
Stuck in the foothills of digital
But Kennedy, who started out in her career as an underwriter, also expressed disappointment at how the protection insurance sector has been left behind in embracing technology.
“We’re still talking about digital in a way that it’s a new thing where every other service sector is beyond digital now. They’re into AI. They’re even into the Metaverse,” Kennedy said.
“It’s a completely different space and we still feel as if we’re in the foothills of that digital innovation. And the same way that our products really haven’t changed in decades.
“I started off as an underwriter and I can still see stuff three decades later that I would have been doing in my first year of underwriting.”
Consequently, Kennedy challenged the sector to think much more about servicing customer needs.
“Can we have much more flexibility within product benefits on offer and not just design single products covering a single need?” she continued.
“Instead, we’d be selling them products with the flexibility that means whatever happens to them if you didn’t take out income protection (IP), if you now need it, if you’re ill, we’re able to cover that, if you’re diagnosed with a condition, we’re able to cover that.”
Open for innovation
And the key theme for Kennedy, is that LifeSearch is open for innovation amid the march of the disruptors, she added.
“We want to help insurers test new products and as a distributor we feel that with the last mile in the service chain that we will help get those products and offerings to the right customers for insurers,” she said.
“I think that’s what insurers have struggled with – that there often has been some great ideas over the last few years and actually they can’t get them to the customers in the right way – either directly or via advisers and intermediaries.
“So the big thing for me is that there needs to be these innovators that are prepared to test, prepared to fail but prepared to try something new in our marketplace.
“And I think the other key thing is – adapt for your customer. We can no longer have a one size fits all underwriting process for every single customer. There’s got to be something that we’ve got to change now and allow real flexibility in products.
“I think what’s holding us back as an industry is often our technology and a lot of insurers have got legacy systems, mainframe systems built in the 1970s, that the type of product, the type of customer flexibility and hyper personalisation we’re talking about now will not come easy.
“But maybe does that open the way for some absolute new disruptors to come into our market and do something different because we can’t change because we’re being held back by legacy systems.”