As a product, life insurance does not really change in nature. You die and your loved ones make a claim and their financial needs are taken care of.
But processes around the product and the needs of customers have certainly changed, particularly as life cover is so inextricably linked with the mortgage market.
And while customers want more from a product that still suffers from a reputation problem as purse strings tighten, advisers are now talking to customers about a cost of death crisis rather than a cost of living crisis.
Consistent customer needs
“At one level, customer needs have stayed consistent over time – they and their families still need protection against the potentially devastating financial impacts of death, long term sickness or disability,” Peter Hamilton, head of market engagement at Zurich, tells Health & Protection.
“In the search for something new, there is a danger we lose sight of the massive positive difference we are already making to hundreds of thousands of lives through the payment of many millions of pounds in claims.
“That said, there is always room to improve what we have, to minimise the gaps and overlaps in cover, and the growth in added value services is an obvious example of this.”
Fighting product misconceptions
But Hamilton also points out that the sector needs to continue to fight the misconception that claims are not paid.
“They are, in very large numbers, and we should be very proud of that,” he adds.
“And for those clients who might need convincing that ‘it may happen to them’, there is more material available now than ever.
“Claims statistics certainly, but more importantly claims stories, videos that can be sent to clients in advance, breakdowns of the reasons for claims and clear explanations as to why, very infrequently, claims may not be accepted.”
According to Jennifer Gilchrist, protection specialist at Royal London, overall, demand for life insurance has held up, partly due to the pandemic and a heightened awareness of the role protection can play in providing security and peace of mind.
“The cost of living crisis and affordability has been a real challenge for consumers, but the industry has stepped up, supporting customers wherever possible with financial, emotional and practical support,” Gilchrist continues.
“Ultimately this helps position protection insurance as a necessity rather than a nice to have.”
Evolving product
Fran Bruce, managing director of protection at Aviva, agrees, adding firms have been offering more in the way of wellbeing benefits over the past five years or so.
“This has changed how the benefits of life products are considered as more immediate, not just a ‘just in case’ for the worst case outcome,” she says.
“And those who are engaged with wellbeing benefits may interact more regularly with their product than they would have done before.”
Added value benefits often comprise a range of free services such as virtual GPs, mental health consultations, second medical opinions and physiotherapy support, to name a few.
And one thing certain in these tougher economic times is that consumers want more than a basic policy.
Home Group Financial owner Miles Robinson notes: “We are seeing providers increase the value-add benefits so consumers are benefitting from additional services such as nutritional support, wellbeing support, retail offers etc.
“I see these policies becoming more comprehensive over and above the actual purpose of the product to pay-out on death.”
Underwriting and application processes have undergone significant changes as well.
Alan Richardson, head of expert advice at LifeSearch, points to changes such as adding the ability to apply online instead of filling out 30-page forms, gender neutral pricing, electronic trusts and the evolution of comparison sites.
Meanwhile, Moneysworth director Andrew Wilkinson highlights that ex-smoker rates are being applied more commonly now and not all insurers are rating the same for ex-smokers.
Other trends include for HIV positive people there has been significant improvement in terms offered now across many insurers, and customer journey times for some have increased even more in the last year or so.
However Alan Lakey, director at CIExpert, has noticed that across the protection sectors application journeys are proving a mixed bag.
“The application journey is both better and worse – better inasmuch as some areas such as mental health are less likely to create delays,” he says.
“However when they do make enquiries the period to acceptance, rating or decline is much longer – possibly due to surgeries failing to consider GP reports (GPRs) as particularly important.”
Challenging mortgage market
These tougher times for the economy with the protection sales typically so closely aligned to a topsy-turvy mortgage market means an opportunity for advisers to adapt conversations with clients, .
“The ability to pay off a mortgage having suffered a critical illness or long term disability allows the claimant to focus on a full recovery without having to worry about where the next mortgage payment is coming from,” Zurich’s Hamilton continues.
“The mortgage market this year in particular is likely to be challenging, but advisers have the chance to give more weight to family protection, arguably overlooked by some when mortgages were plentiful.”
But LifeSearch’s Richardson adds he has noticed fewer life cover purchases connected to first time mortgage lending – meaning advisers are more preemptive around customers’ need to review.
“We are seeing a reduction in the number of life insurance purchases connected to first time buyer mortgage lending, which has largely been balanced out by the boom years of mortgage lending that preceded it,” Richardson continues.
“More often, conversations now require a different approach to review existing benefits rather than just talking about new cover. So, advisers are being more proactive in pre-empting a customer’s need to review.”
Another trend Richardson points to is the increase in customers looking for life insurance to cover Inheritance Tax (IHT) liabilities.
“The rises in interest rates have led to some other forms of IHT mitigation becoming less viable, such as equity release,” he added.
“The rise in interest rates have also led to a noticeable reduction in guaranteed whole of life rates, making the solution more attractively priced.
“Alongside this, the number of gifts being made to younger generations to help them on to the property ladder, and out of spiralling rental costs, has further increased IHT protection conversations.”
FIB a lower cost option
And Naomi Greatorex, managing director of Heath Protection, agrees she is certainly increasingly talking about family income benefit (FIB) as an option.
“This is a very cost-effective way of purchasing life assurance,” Greatorex notes.
“Also I am dealing with an increased amount of business owners, so relevant life cover recommendations have increased due to the tax efficiency of this option.
“I am seeing an increased amount of customers talking about how much they can budget for as an initial guide to cover, rather than how much life cover they want.”
Cost of death crisis
Ultimately though – customers who do not take out life cover risk facing a “cost of death” crisis, an issue Joanna Streames, owner of Velvet, is increasingly raising with clients.
“We are having to reiterate the importance and possibly be bolder with the advice, challenging their objections on cost,” Streames says.
“We are talking about the cost of death crisis or the cost of sickness crisis.
“I think it will be more of the same in terms of people being tempted to cancel existing plans because all they are seeing initially is that they can cancel and save money.
“It is important that we, as advisers, look after clients more in this climate so they don’t leave themselves vulnerable in the event of death or sickness.
“It means more work for us, but it is what is needed and the client comes first. We even signpost poeple to other businesses to look at their energy, car insurance and such. It means they can help save a bit to add towards the bills fund and keep their cover.”