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BlogsOur latest blog is from Peter Chadborn, Partner at CBK Munich Re recently suggested a GIO (guaranteed insurability option) as an optional extra for protection policies at the time of purchase which covers the policyholder against having to pay back-premiums if they were ever made compulsorily redundant and had to lapse their cover as a result; the reasons being that rewriting the policy may not necessarily be in the policyholder’s best interest. The reinsurer also pointed out that Providers should consider the acquisition costs of a new policy versus a little flexibility to keep an existing client on their books. The cynical amongst you would question the take up of such an option when the adviser is faced with the choice of helping their client exercise a useful GIO, for probably no remuneration, or re-broke/churn the policy and get paid again. And that view is not without foundation. Those with rose-tinted glasses, and dare I say a vested interest, would always promote the notion that a good adviser should re-broke a policy if this action will present their client with material benefit. True, of course. But lets be honest, it’s not beyond the wit of most intermediaries to produce a compliant justification for almost any re-broking transaction. But it is not for this reason alone that I think such a valuable option would be underused. The whole remuneration and reward structure of the protection industry is conducive to rewriting policies at any given opportunity rather than utilising flexibility options - once outside of the clawback period of course. For example, a straw poll amongst some other IFAs confirmed our experience that when contacting a life office’s sales team for guidance on options for a client who is a few months in arrears with their policy; in the majority of cases we will be encouraged to rewrite the policy. After all, sales teams are rewarded in accordance with sales volume too. The whole industry works in this way. Why is it, for example, that hardly any companies offer flexible commission options? There are absolutely no incentives for me to keep business on the books beyond the indemnity period and a tempting incentive to re-broke/churn it. Why do life offices bow down to pressure to offer 2 year indemnity terms? If the persistency of business written under those terms is inferior to that written under 4 year terms, why would you want a share of that market? I wouldn’t write business on a client if I thought they were only taking a 2 year view on it. Even the ABI and the respected Swiss Re Term & Health Watch only report new business activity. They don’t report how much new business or cases written relate to actual new cover and separate out that which is rewritten cover. Until the industry begins to emphasise, reward and remunerate the quality and ‘stickability’ of protection business and not just the volume, the remuneration-influencing-behaviour sickness will be here to stay. Roy Chappell comments on the parallels between GroundHog Day and the Protection Industry “GroundBlog Day” In the 1993 film Groundhog Day, Bill Murray played Phil Connors, an egocentric Pittsburgh TV weatherman who, whilst covering the annual Groundhog Day event in Punxsutawney, found himself repeating the same day over and over again. When Phil Connors first realised his life was in a loop, he initially decided to take advantage of the situation in a bad way; he learnt secrets from the town's residents, seduced women, stole money, and drove whilst drunk. However, his attempts to get closer to Rita, the girl of his dreams, repeatedly failed. Eventually, Phil became despondent and tried more and more drastically to end the time loop, eventually kidnapping Punxsutawney Phil and, after a long police chase, drove into a quarry, appearing to kill both himself and the famous groundhog. However, Phil Connors woke up and again found that nothing had changed. Working in the Protection Industry, do you sometimes feel like Phil Connors? I must admit that I have sympathised with his plight on more than one occasion – a couple of illustrative examples:
Back to the film…… When Phil explained the situation to Rita, she suggested he should take advantage of it to improve himself. Inspired, Phil endeavoured to learn more about Rita, building upon his knowledge of her and the town each day. He started to use his by now vast experience of the day to help as many people around town as possible. Eventually, Phil was able to befriend almost everyone he met during the day, using his experiences to save lives, help townspeople, and to get closer to Rita. He crafted a report on the Groundhog Day celebration so eloquent that all the other stations turned their microphones to him! After the evening dance, Rita and Phil retired together to Phil's room. Phil woke up the next morning and found the time loop was broken; it was now February 3 and Rita was still with him. Happy ending! Can the Protection Industry learn from Phil Connors? Phil, spoke to people and he listened, he learnt from his experiences and realised he needed to change what he was doing to get a different and improved outcome. Every day in this industry, I meet incredibly intelligent and passionate people who I know really want to make a difference and ensure more people have the valuable protection that our industry provides. So what needs to change? I believe that we need to consciously park the day job from time to time to allow us to take a step back and look at things from a different perspective - consider the subject areas of the above examples again:
The common theme here is that these two companies, like Phil Connors, have realised that to change outcomes you need to do things differently. I certainly don’t have all the answers but speaking to and actually listening to our end customers has to be the starting point. Only then can sales-people, insurers and reinsurers begin the process of thinking of ways to take our industry forward. HSBC and Irish Life are excellent examples of genuinely consulting with customers and designing propositions accordingly, rather than just using customer research to justify what we think our customers want or need. The opportunity afforded to our industry now by the political and fiscal situation our economy faces is a genuine once in a generation opportunity for us to work with Government to drastically increase the role we play in protecting the people who live in our country. We can and should listen to our customers – we can make it to February 3rd and beyond! Matthew Clark, CEO of TCP LifeSystems wonders when will we exploit the maturity of today’s IT capabilities? Whilst IT capabilities have evolved for many years and in the last decade have come to maturity, the roots of many of our core systems date back to the 60’s. The internet is now taken for granted in every home and has been fully exploited by the leading retailers, but is yet to be fully embraced in Financial Services. We in TCP LifeSystems believe that this revolution is far greater than just selling over the web. If correctly managed, businesses can now regain control of their operations through rule-based configurable systems. Configuration – Today’s systems, such as our own SS/G are written for rules-based configuration, rather than requiring expensive IT customisation and today’s low cost of processing power allows them to perform acceptably, even in mass deployment. Configuration goes far beyond product and calculation rules and should include process definition and security authorisation. Rules must be dynamic and not limit the scope of products, benefits or distribution channels. With a comprehensive rule set, multiple channels servicing multiple products (potentially with different underwriting philosophies) can be supported. Additional benefits include significantly reduced timescales for introducing new channels, products, philosophies and rates with the advantage of minimal testing and reduced risk. The more dynamic a provider is in embracing these capabilities, the quicker the ROI. Deployment - With the right technical architecture comes the greatest choice of deployment options. Software as a Service (SaaS) allows a business to choose how such systems are deployed, in-house, outsourced or as an externally managed and hosted service, which with well constructed SLAs would provide flexibility at a predictable cost. A SaaS model is ideal for business acquisition, which by its very nature is holding transient information. However this model is also appropriate when considering long term servicing. For years we have seen Providers merging, but their systems have not; partly because a business case cannot be made (some historically have cost millions and failed). More often it is because of a continual focus on new business as the driver, thereby using up the entire budget available. The solutions described above can make the business case significantly easier when considering the reduced implementation and migration cost of conversions compared with the typical administration and IT cost of running legacy systems or simply “keeping the patient alive on life support”. Such systems not only provide a quick ROI, but also build in levels of future proofing. No one can predict the products of tomorrow, but the more flexibility built in through the rules management, the easier it will be to adapt. All recognise that our industry suffers from a lack of innovation. Historically IT must take a good deal of blame. Today this is not the case; IT has finally arrived as the enabler of competitive advantage for the progressive Provider. This is a great opportunity for them, and possibly an even greater opportunity for new entrants without legacy. Gerry Warner, Protection Development Manager, Zurich UK Life suggests that the time is ripe for reminding customers of the need for Protection I guess I’m in a state of confusion at the moment. On the one hand, there appears to be a plethora of new mortgage deals coming to market; some quite innovative, albeit with most requiring a substantial deposit. Wasn’t May the busiest month for mortgage activity for some time? And yet I’m hearing (if not actually experiencing it personally) that protection sales are decreasing, that mortgage advisers are saying that the market is stagnant with people scared to move in the face of potential redundancies and the belt-tightening we all must face. I’ve heard of one network recommending a move to two-year indemnity commission and then an active rebroking exercise. Redundancy cover seems to be flavour of the month, perhaps unsurprisingly. And perhaps potential customers are beginning to recognise the risks they face in the event of their inability to work with an increased interest in Income Protection. But if ever there was a time for advisers to re-visit existing customers and review the paucity of their protection cover, surely it’s now. I don’t mean a simple rebroking exercise where existing business simply swirls around. I mean looking to customers with mortgages who have taken out no life cover, or insufficient levels of cover; or for those who did, upgrading to critical illness cover, and dare I say it, Income Protection? Even setting aside new opportunities such as Business Protection and IHT Mitigation, there are some very basic customer needs that need to be fulfilled. Most have worked extremely hard for what they have and whilst redundancy has come to the fore, on the back of the economic downturn and cuts in Government spending, we, as an industry should not be remiss in reminding customers of the other potential catastrophes that might befall us. For example, McMillan Cancer Care highlights the potential financial impacts, not least on a patients ability to hold on to his or her home: • 1 in 17 cancer patients lose their home. We could list the chance of suffering a heart attack or stroke – the statistics are endless. The point is that, as a nation, we are massively under-insured and yet protection cover has never been cheaper. When customers baulk at the potential costs, ask them what they spend on the lottery each week, or that cup of coffee on the way to work. We have customers who are sorely in need of protection right now and collectively, we have the means to help Neil Sharp, Director at Insight Now, discusses the use of new technologies in providing feedback to improve the customer experience Want to Know what customers really think about your Service? Ask a Twit.
Is someone who uses Twitter called a Twit, or a Tweeter… or both? I realised halfway through a meeting with a client this week that I didn’t know the answer to this all important question. My client heads up a large part of a highly regulated business that turns over billions each year and the press hound them relentlessly. My team and I are helping them to change the company culture to truly put the customer at the centre of their business. They are having interesting conversations with the regulator about customer experience measures; measures that will not only prove that they are treating their customer’s fairly, but also provide feedback that can be continually acted upon to drive the right employee behaviours. Sound familiar? We talked about engaging call centre staff and how customer feedback plays a significant role. I shared our experience of giving staff a clear sense of purpose and how delivering ongoing real-time customer feedback directly to them as individuals, showing them how well they are delivering against that purpose, is a great start. During the conversation I started to wonder whether there was a link between engaging your contact centre staff and utilising some of the new technology enabled social networking tools like Facebook and Twitter? Call centre agents like to talk and they also like feedback on how they are doing. Customers have been happy to share their feedback since “trade” began, especially the angry ones! The first ever piece of dissatisfied customer feedback probably started with a grunt, descended into a stream of profanities and ended with an act of violence on the Trader. Indeed, we find that this is a familiar type of feedback for some of our clients, except the violent urge goes unsatisfied due the verbal “buffer” that many call centres (sometimes on distant shores) are often seen as. Running customer surveys serve a vital purpose in many businesses. Scores can be delivered for all sorts of measures and experiences, such as overall satisfaction, the likelihood the customer will recommend and even through to whether the agent sounded like they were smiling whilst being screamed at! But is there is a lost opportunity if you simply force customers to translate their thoughts into simplistic multiple‐choice responses? Complex emotional feelings about an organisation are shoe-horned into a point scale without giving any sense of “why?" This is why including open-ended questions that generate a stream of consciousness from customers is so useful – especially the negative ones. A customer experience score of 8 out of 11 tells you that there is room for improvement, but doesn’t tell you what to do to improve that experience. However, 50 requests pleading for you to make an annual benefit statement simpler and more understandable is feedback you can act upon. But to focus just on solicited feedback is only half the picture. With applications such as Twitter providing a real-time avalanche of dialogue, and with the social web expanding fast, many social media monitoring companies are offering clients the ability to delve into this stream of un-solicited feedback. How many people are mentioning your brand? Are any of them moaning about you and why? Has someone struggled with a claim? All this monitoring happens live, is fully automated and can be very cost effective. However, if I am honest, I am not yet completely comfortable with these applications and their social or business impact. At the press of a button, a reputation can be bolstered or wounded as one persons experience is shared with thousands within seconds! But, like it or not, this is a trend that has a head of steam. Increasingly your customers, future customers and colleagues are publishing their thoughts for free in ways un-thought of just years ago. My client already gives their frontline employees access to immediate customer feedback so they can judge their own performance, but how about giving these front line staff access to social media accounts to interact with customers as they “chat” about your company, product or service? As well as opening up a new channel for service, the feedback can be analysed to sense the mood of customers and to eek out nuggets of useful feedback. Is this a recipe for anarchy and inefficiency or a revolution in connecting with a whole new generation of people who may choose to spend their money with you? I am fairly sure that the Twits (or Tweeters….) within the organisation will find it fun and engaging. So, is it worth a try? Oh, and by the way, my client is not an insurer or indeed part of the Financial Services sector …strangely though, the challenges they face do have striking similarities. Dr W T Hamilton shares his thoughts on GP commissioning The release of the White Paper on the NHS is yet another step on the near permanent revolution faced by NHS clinicians and administrators. While most of us recognised we were being naive in hoping for a period of NHS stability, I don't think we expected to have such a major change as full-blooded GP commissioning. Will this have an impact on protection insurance? Trevor Davies of Kennedys Law LLP comments on the Law Commission’s consultaion on whether insurers should pay a policyholder for late claims payment Under Scots law, if an insurer refuses to pay a valid insurance claim or only pays after unjustifiable delay, the aggrieved policyholder can also claim compensation (in other words “damages”) from the insurer. The proviso is that the loss (such as financial hardship) must be foreseeable when the policy contract was entered into. In England and Wales it is different because a policyholder can only claim “damages” for the sum insured (plus interest on the sum assured if awarded by a Court). But what happens if, say, a critical illness claimant suffers financial hardship due to the insurer’s wrongful refusal to pay or late payment? Under the current law (Sprung v Royal Insurance (UK) Ltd 1999) he cannot also claim compensation in law for that financial hardship (although the FOS may make a relatively token award). The Law Commission says this is unfair and that the English law is out of step with other countries. The Law Commission collated comments from insurers and other interested parties on its’ ideas for reform by 24 June. Will this process lead to change and what could be the impact? Typically, claims for delayed payment of debts do not give rise to a claim for damages for breach of contract. So why and how should insurance claims be treated differently? One option is to change the Act which concerns the age-old principle of “good faith” (s17 Marine Insurance Act 1906), so that policyholders can claim damages where an insurer has not acted in good faith. Another is to reverse the Court decision of Sprung. If a change ultimately happens it is clear from the Law Commissions’ comments on the subject that (i) the policyholder should be required to prove his loss caused by a declinature or unjustifiably delayed payment (ii) the loss must have been foreseeable (in the mind of insurer/policyholder) when the policy was entered into, and (iii) that the policyholder has been reasonable himself by trying to limit his loss. One aspect which should, and must in my view, stand the test of time is the necessity for insurers to have a reasonable period of time to investigate the claim. There are some obvious downsides to a change in the law. It could be a charter for satellite disputes. How long is a “reasonable” period to investigate? – a subject which has been hotly debated in Australia! At what point does it become unjustified? Will a policyholder also try to lump together losses already incurred during the “justifiable” period for investigation? Will some policyholders use this as a threat to put pressure on insurers to make hasty decisions, without completing reasonable enquiries? Should any damages awarded be proportionate to the underlying policy claim? Costs are at real risk of going up as a result of these proposals, at a time when there are commercial pressures not to increase premiums. The upshot may be the need to have a preordained and swift dispute resolution mechanism to deal with the uncertainty and potential for disputes that this could unearth. The life industry has shown that it will take the bull by the horns by the introduction of the ABI Code 1/2009 on managing claims, which addressed the concept of proportionality. In the non-life field AIRMIC (The Association of Insurance and Risk Managers) for example has introduced a statement of principles for resolving policy concerns when dealing with potentially high value claims investigation in the early stages. There has been an historical reluctance to tinker with the duty of good faith. The most sensible solution may be an industry approach to addressing and investigating claims, with a dispute resolution mechanism to contain the potential for satellite disputes, so that everyone can concentrate on the key job in hand: – i.e. reasonable conduct on both sides during a claim and ensure that ‘problem’ claims are dealt with within an agreed timeframe. Or to put more shortly, paying valid claims promptly. John Gilman and Phil Friend share their thoughts on early intervention and why it is not always successful There cannot be an HR Director in the UK who has not had brought to their attention the fact that 'early intervention' can play an important role in returning employees to work in certain cases of sickness absence or disability. Similarly, legions of line managers have been made aware of the importance of managing absence and the processes that need to be adopted in order to do this. Despite all these well-intentioned initiatives, however, in our work with employers and employees we still consistently come across situations where employees with disabilities are either wrongly languishing at home on long term absence or unhappy and less productive at work. So why is this? Reasons can be complex, but fall broadly into a number of categories which often overlap. We have set out a few of them below: Collaboration and support versus intervention: Mental health problems frequently feature in reasons for absence, both short and long term. Attitudes to people who have these conditions vary widely - from sympathy and understanding to outright cynicism or fear. In many cases, no one can be absolutely sure (including the employee) what the best route back to work will be. It may be a long journey with decisions taken on a daily basis. Unfortunately line managers are frequently poorly equipped to take responsibility for this and their attempts at 'early intervention' are clumsy and sometimes damaging (asking an employee with a mental health condition to visit the office to discuss their condition is often a bad idea and can make matters worse, sadly we know of many instances where it has happened). Our advice? Stop making line managers responsible for things they are incapable of dealing with effectively. Get the right people involved and wherever possible, make sure the employee feels they have some control of their own situation. And while that is happening, take time to establish what the line manager's attitude is to those with mental health conditions- this will be fundamental to making a return to work possible. The effectiveness of 'policies' or 'guidelines' is not monitored properly: Merely tracking a few metrics (for example the frequency and duration of sickness absence) doesn't always reveal what is really happening on a day-to-day basis. For example, earlier this year we carried out a research project for a client with 3,000 employees. The employer had invested huge sums in management time, training, policy drafting and assistive technology in order to ensure that they treated all employees fairly, consistently and legally. Yet one of our research findings was that over 72% of assistive technology users felt isolated, harassed and discriminated against - a significant exposure to subsequent long term absence and to litigation. But because they were still turning up for work the usual absence management 'triggers' were not activated. The system can work against you: Whilst working for a financial services client, we discovered an employee who needed a specially adapted chair because of a back injury. He was still not back at work five months later because ‘Office Services only order new furniture every six months so we can get a bulk discount’. Culture and management protocols play a major role in whether early intervention will work: Everyone knows that, we hear you say! When we talk about cultural barriers in getting people back to work people often have a stereotypical view of some monster employer where everyone works long hours, targets are ruthlessly pursued and the organisation 'doesn't carry passengers'. But in reality barriers can exist for a variety of reasons. For example, for another one of our clients, there was a problem with the performance appraisal system. It did not take into account situations where poor performance was directly related to IT shortcomings - so line managers were faced with a dilemma. Give the disabled person a higher rating in order to be fair to them (and make other employees resentful) or give them a lower rating (and make them feel unfairly treated). There were no clear guidelines as to which approach to take. There are, of course, organisations where performance is critical and tough management attitudes are part of the culture. Long term absence and the development of mental health problems can be linked to issues related to a person's performance and this needs to be established if any form of return to work is likely. One thing we also know (but don't have empirical evidence to prove) is that someone is more likely to return to work if their manager likes them! Working with dozens of employers, we have learnt much over the last 20 years about what works and what does not – so let us know if we can be of any help to you, your colleagues or your clients. We would also welcome any comments you have concerning this article so do feel free to drop us a line.
phil.friend@radar.org.uk
Phil Friend is Chair of the Royal Association for Disability Rights (RADAR) and John Gillman is one of their Board Directors. Peter Barnet keeps it simple… KISS fans will be ahead of me with the song’s opening lines of ‘I caught the tail of a hurricane and I’ve never been the same’. Protection can’t expect to remain isolated from the economic storms and it’s not just obvious pressures that will shape the market, like getting a share of the shrinking consumer disposable pound and pressure on margins, but also structural issues like capital requirements and the regulatory environment. According to the OBR, the UK 2010-11 borrowing figure is £155bn with the overall public sector net debt expected to rise to £1,376bn by 2014-15. In the emergency Budget the Government announced its intention to tighten fiscal policy by something like 5% of GDP during this Parliament. The risk is that the economy may fall back into recession and with interest rates probably remaining close to zero for some time yet, there is a risk of more froth developing in asset markets, including housing. To combat this risk the rhetoric is now over and the regulatory axe has fallen as the Government seeks, at the expense of slicing up the FSA, to transform the Bank of England into the dominant UKfinancial regulator. Thus the Bank, alongside the management of interest rate policy, will have a new policy arm to stop those risks in their tracks called ‘macro-prudential regulation’. This consists of two main attributes - on the demand side households' access to credit will be controlled and, on the supply side, financial institutions, if they show signs of wavering with regard to risk profile, will be subjected to ever higher capital requirements. Among the changes, individual firms will be supervised by a subsidiary of the Bank of England, the so-calledPrudential Regulator, and to look at macro issues an independent Financial Policy Committee will be created. The FSA’s current consumer responsibilities will be replaced by a new Consumer Protection and Markets Authority that will regulate the conduct of authorised financial firms. It will include the FSCS and the Financial Ombudsman service. This turmoil in the regulatory environment for providers, while designed to assuage consumer fears in the long term, could easily, on the ‘no smoke without fire’ principle, harm consumer confidence in the shorter term and make the protection selling proposition even harder. To date buoyant public spending and rock bottom interest rates have insulated households and employers from the full impact of the economic contraction but inevitably over time a reduction of some 5% to 10% in real disposable incomes must impact spending patterns more widely. While the new coalition is unlikely to cut spending further this year beyond the £6bn ‘down payment’ already announced, these changes, and the fall-out in terms of more turmoil in the jobs market, could have a serious impact on both the products insurers sell and the consumer appetite for them. The key issue for me is that as the ‘cuts’ bite, and public provision of health and welfare is rolled back even further, even if individuals and employers desire to buffer their healthcare provision from private funders and providers, will consumers large and small have either the confidence in financial services to shop from them or the money to acquire the products? While the jury is out, I still believe that if providers can get closer to their customers, find the right mix of products and services and get the pricing right there is no reason why, in terms of market innovation and growth, it can’t be the consumer desire to plug the gap on reduced public provision which wins the day.
Leading PMI intermediary and AMII past-chairman Steve Walker laments the imposition of FSA rule on the PMI sector. Will that change now there’s a new team at Number 10?... Back in 2001 the Government received a European Directive from Brussels requiring them to introduce statutory regulation of the general insurance industry by January 2005. Prior to this the industry had been ably regulated by the GISC (General Insurance Standards Council). The GISC understood and worked very closely with the industry, delivering measured and appropriate regulation. But it wasn’t statutory regulation and for whatever reason the treasury came to the conclusion that it was better for the FSA to start from scratch, using their experience in regulating the financial services industry, rather than harness the experience and expertise of the GISC. The process of putting the new regulatory system in place was initiated in December 2002 when the FSA produced its consultation paper CP160 – Insurance selling and administration: the FSA’s high-level approach to regulation. It was a mammoth task for the FSA to understand the workings of the general insurance industry with its multitude of products and practices and put statutory regulation in place within a two year timeframe. In my capacity as Compliance Officer and Chairman of the Association of Medical Insurance Intermediaries (AMII) I was a member of the GISC’s PMI panel and subsequently attended a number of meetings with the FSA at their Canary Wharf headquarters to help them understand the intricacies of PMI. It was quite obvious on my first visit, taking in the state-of-the-art offices adorned with a profusion of costly modern art originals, that this was going to be an expensive operation – as it has proved to be. The industry, particularly the small broker, has been burdened with the high cost of maintaining FSA regulation and its taskmasters in their ivory tower; a cost that ultimately has to be passed on to the consumer. It remains to be seen whether the new Government will now carry through the Conservatives’ manifesto commitment to disband the FSA quango and replace it with a more efficient and cost effective regulator for the industry. I would like to think that they would call on the expertise and experience of people such as Branko Bjelobaba who headed up the GISC PMI panel, is a Vice President of the CII and a highly respected GI regulatory consultant. But that is probably too much to expect! 16 June 2010 Lucian Camp recalls the time he met the FS Good Fairy…. I haven’t told anyone about this before, but about fifteen years ago the FS Good Fairy made one of her rare appearances in my office, and – being an ungenerous sort of fairy – offered me just one wish. I was sorely tempted to make a sort of composite wish which would have involved the uninvention of Arsene Wenger, the avoidance of an interminable era of pointless strife and indecision at White Hart Lane and a very different outcome over the following period in the balance of power between the two giants of north London football. But after some hard thinking, my concern for the industry I work in and the consumers it serves somehow overcame my love of my football club. Plus, at that point Terry Venables was in charge and things were going quite well at the Lane anyway. “Please, FS Fairy,” I said, “Could you arrange things so that by, I don’t know, about 2010 there could be a big fat digital pipeline plumbed in to about two-thirds of the homes in the country, which would enable all of us in financial services to enjoy unlimited interaction with our customers and prospects at virtually no marginal cost to either us or them? Because, you see, FS Fairy, if only we had that kind of connection, then we could totally transform the whole business – the shape of the financial services market, the kinds of products and services we offer, the way that people think and feel about their financial lives, everything.” As you’ll have noticed, over the following years the first half of my wish came totally, spectacularly, miraculously true. The second half, though, absolutely didn’t. Right across the whole of consumer financial services, I can only think of one big new thing that has been made possible by the Internet: price comparison sites. Apart from that, we’ve used it to increase the speed and decrease the cost of all sorts of long-established processes, and to some extent its cheapness has allowed us to do more of various long-established things, like sending out boring emails and digital newsletters which most consumers greet with unrestrained cries of indifference. Nowhere has this lack of digital innovation been more apparent than in the protection market. True, buried away in some big players’ websites, there are now some slick and horribly under-promoted online buying-points. (There’s also, incidentally, a much larger number of what look like online businesses but are actually what you might call conline businesses, promising a low-cost quote but actually delivering nothing online at all, using the website only to capture the data that allows dispiritingly old-economy boiler-room salespeople to torment enquirers with endless phone calls for months after they were stupid enough to part with their phone numbers, but let’s not waste any more than this one very long sentence on them.) But where’s the new stuff? Where are the new ideas about products? Where is the digital-centric business that’s thought through from top to bottom to make sense of this new channel, in the same way that Direct Line rethought the GI business model to make sense of the telephone channel a generation ago? Where is all the engaging and involving new digital marketing? Where is the use of this wonderfully low-cost channel to identify particular market segments and niches, and develop propositions specifically for them? Where is the new kind of engagement and interaction with people which actually involves listening, as well as talking at them usually with dire warnings about the risks they run if under-insured? Where, in short, is all the new stuff? I’m pretty sure it doesn’t exist - or if it does then no-one’s telling me or anyone else about it, which is just as bad. (When it comes to advertising, for example, if you exclude funeral plans there’s still less for life assurance than there is for pet insurance, which strikes me as mildly amusing but also horribly depressing.) Stories involving the Good Fairy always go horribly wrong, with the wishers’ wishes backfiring on them in some unexpected but inevitable way. This one’s no exception – or at least, at the moment it isn’t. But even at this late stage, it’s still possible for us to wake up from our long slumber and actually start taking advantage of this miraculous thing that the FS Fairy created for us – or, actually, specifically, created for me. And I hope we start soon. Because if not, the next time she drops by, I’ll be using my wish on Tottenham Hotspur. 25 May 2010 our latest blog from Alan Tyler The new coalition government has reached agreement on a common programme with a speed that has astonished many of our European neighbours. In doing so, the welfare reform agenda is unlikely to have delayed them for too long, as in several important areas, the LibDem election manifesto was strangely lacking in policy. However, there is evidence of compromise and more may emerge when the next level of detail is revealed. In truth, there have not been significant differences between all three major parties in what they wanted to achieve, the issues have been how and how quickly to achieve this. The former Labour government has been hugely consultative but slow to implement. The Conservatives, having stolen one of Labour’s policy advisers, David Freud, seemed to have settled on a way forward which they wanted to implement as soon as possible. So what has now emerged? Many key Conservative pledges remain including proposals to re-structure all existing Welfare-to-Work programmes, bringing services together to help all unemployed people (from whatever cause) back into work. Support for those facing significant barriers to work will be fast-tracked and provider payments will reflect the results they achieve including savings in benefit expenditure. For claimants, receipt of benefit will be conditional on their willingness to work but Conservative proposals to put claimants on community work programmes and for them to lose all benefit if they refuse to participate do not appear in the latest summary. However, a new proposal (Work for Yourself) to help would be entrepreneurs set up their own businesses, giving them access to mentors and start-up loans is an interesting addition. For the elderly, the focus will be on helping them to stay in their own homes for as long as possible but the Conservative’s idea for a voluntary insurance scheme to meet residential care costs has been replaced by the LibDem proposal to establish another commission to examine all options. This will be asked to report within a year. Throughout the programme, there is an emphasis on the greater involvement of private and voluntary sector service providers including giving public sector workers the right to form employee owned co-operatives to bid for contracts. There is also a focus on encouraging preventative action and on giving local communities greater control over public health budgets to achieve this. As private sector providers of benefits and services with a common interest in preventative risk management, this is an area that insurers should monitor closely. So, are we now set fair for a newer, faster-moving era of health and welfare reform? Two factors will be key, money and resources. As the new ‘programme for government’ states rather ominously at the end “The deficit reduction programme takes precedence over any of the measures in this agreement.” Consultant Phillip Cooke reminds us just how important it is to look after the basics... In wondering what to write for my first Protection Review blog, I was reminded of an inspirational story I read a few years ago. Here it is. On a stormy night many years ago an elderly man and his wife entered the lobby of a small hotel in Philadelphia. “All the big hotels are full up”, said the man, “could you possibly give us a room here?” The reception clerk explained that there were three conventions in town, and that was why there were no rooms to be had anywhere. After a moment’s silence he added, “All our rooms are taken, but I can’t send a nice couple like you back out into the rain at one o’clock in the morning. Would you be willing to sleep in my staff room on the top floor?” The couple duly protested that they couldn’t do that, but the clerk insisted that they must. “Don’t worry about me, I’m used to working through without sleep, and besides it really will be my pleasure.” Next morning, as he paid his bill, the elderly man said to the reception clerk, “You are the kind of manager who should be the boss of the best hotel in the United States. Maybe one day I’ll build one for you.” The clerk smiled at the man and his wife, and the three of them had a good laugh over the little joke. He then helped the couple with their and got on with his day. Two years passed and the clerk had all but forgotten the incident when he received a letter from the man. It recalled that night and enclosed a return rail ticket to New York, asking the young man to visit the city. In New York, the elderly man led him to the corner of Fifth Avenue and 34th Street and pointed to a great new building there; a palace of reddish stone, with turrets and towers thrusting up into the sky. “That,” said the elderly man, “is the hotel I have just built for you to manage.” “You must be joking,” said the young man “I most assuredly am not”, said his host, a smile of satisfaction playing around his mouth. The man’s name was William Waldorf-Astor. The hotel was the original Waldorf-Astoria, and the young man, who became its first manager, was George C Boldt. So, if you are trying to improve customer service it is worth remembering that stormy night in Philadelphia – start with the feelings, and the facts will take care of themselves. That’s where we start when we work with clients when they wish to seriously improve customer service, and reap the real business benefits. Solicitor Rona Doyle has a few post-Election thoughts... However what has surprised me even more is how I now feel about it. Being one of those irritatingly optimistic souls, I like ‘new’ things and I like being ‘sold’ new things. I like ‘fresh’ approaches and I truly do see quite a lot of potential in this ‘new politics’ notion. I like the ‘Nick/David’ double act too. I feel rather comfortable about the fact there should be no snap election called when they fall out as they will inevitably do given we’re promised this Government for the next five years. I will be watching it all very carefully indeed and monitoring its ability and impact not just on how affects our ‘Protection’ market but how it affects Britain at large and indeed Britain’s standing globally. So how do we think it will affect our ‘Protection’ market and what can we do to maximise the opportunities that will no doubt emerge as all change provides opportunities? The FSA believes it now won’t be broken up, being ‘saved’ by the input of the Lib-Dem element, but I’m not too sure about that in the long term – it will be a case of watching this space. Clearly the banks and investment houses will face some fairly dramatic and hefty challenges and changes too. What will also change though is each of us will probably be taxed more albeit in a hopefully more open fashion than has occurred over the last few years, and so our target market might perceive it is has even less to spend. One of the resounding soundbites of the last few days of incessant commentating is the following – ‘each individual of the British public has to finally realise that it cannot spend and increase its debt to the level it has in previous years, it has to learn how to save again’. So how do we in this ‘Protection’ market help the individual do that? How do we persuade them to buy our products or maintain the payment of their premiums? How are we going to show that ‘Protection’ products do actually protect their respective incomes and that is what is imperative in these times of such gross economic uncertainly and hardship? Think about how the workforce has changed in recent years. There are now so many home workers, all self-employed and consultants – what products do we have for them? Not a lot and most definitely, none that are affordable or worth it. Get real – get in that market and stop just re-packaging the same old notions again and again. For too long we have given the customer what we think they need, rather than finding out what they want or indeed need. We also expect them to trust us, but yet we do not trust them – what message does this send apart from the fact that we are arrogant, looking for ways to wriggle out of things and that we are not to be trusted. Such enormous financial catastrophes of the nature we’re currently enduring and will go on to endure provide phenomenal opportunities – who is going to be brave enough to avail of them? It’s a new beginning for British politics just now – let’s therefore see some new enthusiasm from the protection market to harness that wonderful energy that’s floating about presently and do something special. 10 May 2010. Paul Brooks from Space01 asks us to open his eyes for him... But to be totally honest, I don’t care. ‘Why not?’, I ask myself, ‘surely it’s a great deal, I mean it’s less than two pints in my local, plus I’ve got two kids (both under six) and a reasonably large mortgage and currently no protection in place.’ So why is it that price led protection ads just wash over me? Right, I need to be careful here because I’m about to criticise my own occupation. I’m not an Actuary or IFA. I’m actually a marketer and I think it’s about time we – as marketers – put our hands up and admitted we’ve failed to deliver on the fundamental principle of marketing – the creation of the need. The importance of communicating the need for protection has been overshadowed by the obsession of marketing teams’ obsession with products and, dare I say it, ‘Brand guidelines’. It’s a problem that exists both in internal marketing teams and creative agencies. Why? Because it’s easy to list product features and obsess about logo positions, typeface and pantone colours. The industry needs to shift emphasis and focus on message. Now, before I get arrested by the brand police, I’d just like to say that I am a great advocate of visual consistency, but let’s not forget that brand guidelines are the servant of a strong commercial message and not a replacement for one. The truth is that human beings are eternal optimists. We all think we’re going to win the lottery at odds of 24 million to 1. Yet, faced with a 1 in 3 chance of being diagnosed with cancer, we all think we’re going to live forever. To respond to this inertia protection marketing will need to get braver and develop much deeper customer insights. Brand will need to get an attitude and learn to disrupt the audience. I’ve never responded to an ad. because of the position a logo, but I have responded because of a brave message. So, maybe all of us protection marketers should spend a little more time worrying about what our work is saying rather than what it looks like. Maybe we should start getting passionate about identifying messages that will force audiences to interrogate priorities and confront the consequences of not protecting their loved ones. So my point is that you can shove product benefits and price down my throat till the cows come home, but you’ll never get me to buy protection until you force me to evaluate what it is that needs protecting in my life. You see, like most adult males, I give my own mortality little air time. But get me to think about my two boys, convince me that I can protect them, well then you can forget your £5 a month for life cover because I’d happily pay much more than that. And I’d be eternally grateful to the provider who opened my eyes to the need for protection. 7 May 2010. Peter Le Beau wonders what the election was all about... I don’t know about you but I felt a bit irrelevant during the election campaign. It wasn’t that I expected Gordon Brown to summon me to Downing Street or David Cameron to ask me to compose a blueprint for the insurance industry but somewhere, just somewhere, I would like to feel that someone was concerned with the fact that vast numbers of people are grossly under-insured. Why didn’t we? Well of course pressing the cause of the insurance industry is hardly a vote winner is it and we all know that politicians take most care in presenting the issues that are most front of mind in this country. I write this blog as the Tories and Liberal Democrats try to hammer out an agreement to form a Government. By the time you read this it may indeed have been forged or Mr.Clegg may have been forced into the arms of Gordon Brown - I’m not all that excited by that image I’m afraid! I have had some interesting contacts with Tory shadow ministers over the past few months and it gave me cause to feel that the cause of promoting protection isn’t always parked in a political layby. The particular issue I was raising was about developing an annual statement that could be released simultaneously with peoples’ P60s to illustrate what sick pay and/or State benefit provisions would apply if a person was unable to work for a significant period of time. I consider it hugely important that people are aware that a large proportion of them would be hugely vulnerable financially if they fall ill or have an accident. It is not enough to rely on the industry to make people aware of this although we could do a lot more. It needs to be that sort of initiative in which Government and industry combine because what we do is extraordinarily important. I think we forget that sometimes or we allow other issues to deflect us from shouting this from the rooftops. FSA and Government are big on financial education but financial education should start with an acknowledgement of key and basic protection needs. This is a message we need to get over to Government. My big fear is that we have to convince a lot of disengaged people in our own wider industry first-and that also includes the FSA . Unless and until we continually outline the value of protection to a financially fragile Britain we are failing in our role as a protection industry. It’s as simple as that. So what are we going to do about it? 4 May 2010. Karin Lloyd ponders whether claims needs to meet technology… Claims and technology – is it finally time to stop avoiding each other? With my latest £12.99 online order came an email telling me precisely what was going to be delivered and another email telling me the latest status of my delivery and when to expect a knock on the door. If I was waiting for £45,000 to pay off a large chunk of my mortgage from your company, what would I get? There is a lot of talk in the industry about rebuilding trust and engaging with consumers and what better way to achieve this than to make the bit they are most interested in more visible? Increased transparency for customers is just one of the many ways that technology could support the claims function and the historic and enormous lack of investment in this area could paradoxically be seen as an opportunity to get radical. How much of the claims process could customers do for themselves? It is easier for customers to trust a company when they feel they have some degree of control rather than handing responsibility over to a faceless call centre, or worse, a mound of lengthy paper forms full of questions that no-one has ever explained the purpose of. This also has the handy spin-off benefit for insurers of handing over part of the administration costs. Far from being seen just as a back-office function, wouldn’t it make life easier for sales people if, when a potential customer asked what would happen if they needed to claim, they could simply show the person how it works? And while customers are there, couldn’t they be linked up to relevant information that might help them negotiate other difficult aspects of the circumstances they find themselves in, such as all that patient-centred health information that already exists, how to find a new job or how to tap into the benefits system? And wouldn’t we be able to produce better-targeted product designs and more accurate pricing if we could learn something from all that priceless claims information that currently sits in handwritten notes on bulky files gathering dust? In the brave new world of the future, what opportunities are there going to be to exploit electronic records? In a country like the UK with a robust and now digitised civil registration system, wouldn’t it be great if insurers could be automatically notified of the death of one of their customers and be able to take away not only the financial pain of such a loss but also the paperwork pain? In the words of John Lennon, you may say I’m a dreamer, but I’m not the only one… 4 May 2010. Peter Chadborn a partner at CBK (Colchester) asks what life will be like post-RDR... The corridors of power across the protection world are awash with speculation on how distribution will evolve pre and post RDR. One of the biggest concerns is that many IFAs writing protection business will turn their back on this sector in their stampede to become wealth managers. Ironically, the FSA were once concerned there would be a shift in the other direction due to advisers addiction to commission. The former is quite likely, the latter is not. However, I do not think the RDR can be singled out as the catalyst for this potential desertion. There are of course many other issues threatening IFAs commitment to protection, not least the threat of the online world but again, I think that is only part of the picture. Sentiment has been growing amongst IFAs that the protection industry is not committed to them rather than the other way round and in many ways I share those sentiments. There are many different IFA models and we all operate different methods and preferred ways of transacting protection business according to our differentials. Every life office operates varying methods of transacting business but the key is that advisers have no choice but to vary their methods to accommodate the whims of each given provider and this is where frustrations are escalating. Life offices seem to assume all IFAs either do business in the same way or are happy to adapt their models to compliment the provider’s method of transacting business. Wrong on both counts. Systems that are designed to ‘drive efficiency’ or provide ‘intelligent underwriting’ are all well and good, and some systems are highly impressive, but they only suit a limited proportion of the market. Therefore, for all those in favour of a particular method or system there are at least an equal proportion who will bemoan the added work-load or incompatibility. My concern is that unless providers offer a range of methods of transacting business so the IFA or firm can select the method that suits them, more will continue to turn away from protection as the added frustration ends up being the final straw. March 2010. Here's a blog from Peter Le Beau who considers life in the wireless world... A new way of doing business Weeding out some old seminar notes a few weeks ago I was intrigued to see that around the turn of the century (doesn’t that sound grand?!)we were still wondering if this thing called e-commerce was going to affect the way we did business! It seems so ridiculous to think that lots of sages were suggesting that this might be just another passing fad although perhaps the experience of e-commerce was a slow dial-up and a very limited range of interesting web material. I can remember a well known industry figure telling me after a visit to America that e-commerce was going to be the biggest development in our business lifetimes.I do not always agree that the USA is ahead of us in many respects but it was clear that new business models were emerging over in the States which were not going to go away. There were two common reactions-the people who blew the dot.com bubble up to a ridiculous degree which with the benefit of hindsight and reflection looks farcical and those in the flat earth society who kept naysaying these new developments.They were both equally culpable of very poor business judgement. But the majority were prepared to wait and see expecting that eventually change would take place. The strategic inflection point; that moment when business changes irrevocably, probably came with the advent of wireless broadband. When communication became so easy people’s expectations were radically changed. If you can communicate instantly on the move by SMS, MMS, phone or e-mail, the public understandably expect everything they do or buy to be as equally easy, enjoyable and immediate.We live in “An instant gratification society”,probably needlessly but undoubtedly irrevocably. Yet have the business models in protection insurance kept pace? Have they even kept pace with the business models in other branches of insurance? And before anyone says protection is different try and see it from the perspective of a customer who buys car insurance and home insurance instantly through aggregator sites using post codes or other intelligent profiling material. If we ever want to sell the sort of volumes that really are attainable we have to make protection insurance easier to buy ,more fun to purchase and remember that the customer needs to be able to buy life and health insurance as easily as he or she buys books,records or purchases holidays. We are still some way from that situation.Are we brave enough as an industry to address it? February 2010. Alan Newman wonders just how engaged we are with consumers... Last week I attended a conference that had been organised by the National Consumer Federation. Its theme was the response of consumers to the credit crunch. It had a very strong line-up of speakers, including: Chris Pond – Director of Financial Capability, FSA David Thomas – Chief Ombudsman, Financial Ombudsman Service Diana Miller – Director, Group Risk & Compliance, L&G Dr Yvonne Braun – Assistant Director, Savings and Retirement, ABI Kevin Brennan MP – Minister of State, Business, Innovation & Skills Lord Lipsey – former Chair, Financial Services Consumer Panel Paul Lewis – Financial Journalist (including BBC’s Money Box) Richard Thomas – Former Information Commissioner Sue Edwards – Head of Consumer Policy, Citizens’ Advice Bureaux I mention this because it illustrates what a hot topic this is. It cost me £120 to attend the conference. There were about 150 other attendees. There were slightly more women and there was a lot of grey hair - average age was probably late 50s. Even though some or many of the attendees may have been in the mass affluent part of the socio-economic spectrum questions and comments from the floor were on behalf of the mass market or less well off sections of society. Sponsors aside, not one of the attendees was from a bank or insurance company. A lot of folk were angry. Government agencies were criticised for being very difficult to do business with. They were too bureaucratic and too slow. There was little or no trust. No engagement. No surprise there; but it meant that headlines about help for working mothers, for job seekers, for the disabled, or whoever were largely ignored. The financial services sector was criticised too – especially the banks. The criticisms and examples fell in to two broad categories: disregard for customers and/or difficult-to-understand products. But here’s the thing: the main message that I got from this event: Financial Services is happy to talk to us consumers – but it doesn’t turn up to listen. (To what extent are you measured on getting out and about and listening to real customers and building a customer-capability network?)  |
