Reports on UK resilience have offered a starkly sobering reminder of the scale of the challenge ahead for the protection market, the cost of failure, and the urgent need for the industry to think differently.
The lack of ‘cash on hand’ is frankly terrifying; UK workers are only a few missed pay cheques away from financial disaster.
We all know that people aren’t putting enough aside, that’s been an issue for years, but the lack of financial resilience should put the financial services industry to shame.
According to the LV= Reaching Resilience Report, a quarter of UK adults had less than £1,000 put aside and one in 10 said they had no savings at all.
Precarious vulnerability
There is also still a notable disconnect.
Two-thirds of the working population over-optimistically consider themselves to be financially resilient, despite evidence to the contrary.
This is particularly evident among self-employed respondents among whom around a third (32%) had savings of less than £1,000 and a fifth (22%) could manage for less than a month without income.
This precarious vulnerability is exacerbated by the fact that just under half (48%) of UK workers hold any form of protection policy, and even fewer (21%) hold a form of income protection.
Crucially, despite industry research highlighting the worrying hoard of adults still at the mercy of fate, sales of protection products are actually dropping.
Furthermore, both NMG Consulting and Gen Re’s market reviews for 2023 show intermediated sales of protection products falling, with double digit drops for term and decreasing term.
Industry stagnation must shoulder at least some of the blame.
While there have been product and service enhancements in recent years, few recent product and service enhancements really break the mould, with most new products now featuring a similar suite of add-ons such as online GP and mental health or physio services.
Critical illness products are becoming more modular and flexible to better reflect customers’ individual and evolving needs.
And when it comes to income protection, offerings are starting to better reflect contemporary working and variable earnings, but other than MetLife’s ChildShield, innovation is pretty uninspiring.
What is very clear is that most developments are not reaching underserved audiences and are still failing to move the dial on protection levels.
Beyond protection heartland
There needs to be a fundamental shift in our target audience – a recognition that the imperative and the business growth lies beyond the traditional protection heartland.
With the average first time buyer age rising to 34, compared with 29 in 1990s, and the rise of Generation Rent, purchasing one’s first home is probably no longer the best trigger for a protection conversation.
And is life insurance the priority or even relevant answer?
Failing to ask ourselves these questions and correct our course accordingly means steadily building a great uncovered generation.
We need to think differently and find different ways to reach new and underserved audiences and co-create products that better address their needs – creating protection that clicks with customers, digitally and emotionally.
Broadening the remit won’t necessarily be simple.
Not only have those historically understood touch points shifted, but so too have the customer expectations and preferences when it comes to buying products or even receiving advice.
This new consumer wants to have the right product, at the right time, in their channel of choice.
This means that the conversations we’re having need to change, as well as where they take place.
Consumer journeys and experience
So, what might this new industry look like?
First, we need protection that is properly embedded within more brand experiences.
While traditional distribution may continue to dominate for a while, new and necessary growth comes from new channels.
Substantial improvement must also be made to customer journeys.
Expectation among consumers is shifting toward seamless movement between digital experience and human touch or support – so-called ‘digital when you want it and human when you need it’.
These new expectations also include personalisation in products, price and service.
We have the necessary tools already; by using data in a responsible way, we should be providing shared value to customers, with ease of flexibility as things change
A real focus on value is also imperative, with both brand care and trust viewed with equal importance to price competitiveness by consumers.
At least part of that goal is achieved by even greater collaboration, through co-design and co-delivery, with the customer much closer throughout.
But to get us there, champions and innovators, as well as disruptors from outside industry must lead the rest of the sector in a necessary (re)evolution.
Not a starting gun, but a sharp dig to the ribs
This is all achievable.
But my hope is that reports such as the LV= Reaching Resilience report, and the NMG and Gen Res market analyses, are not the starting gun for industry change, but the death knell for outdated thinking.
Doing what we’ve always done, sticking with traditional models, and making incremental improvements simply won’t move the dial.
We must prioritise reaching those customers who are not having protection conversations, and who may not want to converse, and improve the access to and relevance of protection products available to them.
Only then will we be able to confidently deliver the necessary hybrid digital and people-powered protection proposition that delivers tailored, quality, and affordable protection.