PROTECTING THE FUTURE
COVER Magazine and Synaptic Software join hands to gaze into the future of protection
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In 2018, life insurance, critical illness cover and income protection are ripe for disruption in the digital world. Innovation around trusts, artificial intelligence and open banking all hold the key to exploit the huge potential these products offer, while evolving smoking habits are conjuring up all sorts of underwriting challenges. Generation Z, meanwhile, represents the next force to be reckoned with when it comes to establishing new boundaries and marketing protection to the masses. All these themes, and much more, are discussed throughout the course of this eBook.
Adam Saville Editor, COVER
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UNLOCKING INCOME PROTECTION
TRUST ME, I'M IN SOFTWARE
MEET ZED
GOING UP IN SMOKE
TAKE FIVE
Exploring how AI and new digital platforms have made IP ripe for distribution
D
espite serving as the most suitable individual protection for millennials, gig economy workers and sufferers of mental illness, income protection (IP) is still hugely
undersold compared to life insurance and critical illness cover (CIC).
12%
IP
23%
CI
65%
Life
via ABI & GRiD
PAID PROTECTION CLAIMS FOR 2017 (GROUP & INDIVIDUAL)
Offering rehabilitation services, counselling alongside other forms of therapy and carer support, income protection policies, however, provide far more than just a financial safety net for those unable to work. According to recent Group Risk Development (GRiD) stats, mental health accounted for 24.2% of all group income protection (GIP) claims in 2017 – the most common reason for a pay-out (above cancer), and given the increasing rate of mental illness diagnoses going forward, this figure is set to rise – for individual policies too. Even though IP sales are still dwarfed by life and CIC, stats from Synaptic Software’s protection research and e-apply software solution, Webline, indicate it is showing significant growth. The emergence of artificial intelligence, chat-bots and smart assistants are able to communicate the benefits of having IP cover in place (and the pitfalls without it) in ways that were previously exclusively available to a face to face adviser – for example, infographs and statistics to highlight individual exposure to risk – mean that IP is ripe for increased distribution. Meanwhile, the future evolution of open banking also offers an opportunity for bancassurers and insurers to integrate and offer IP. Robo-advice alongside access to verbal consultation regarding policy technicalities is key to ensuring that the best-suited cover is provided to consumers as quickly as possible. Tech-savvy millennials requiring cover, raising awareness around mental health issues, and enhancing communication and advice through AI technology via digital platforms all hold the potential to unlock the perks of income protection to an untapped audience.
93.7%
97.8%
IP is not PPI (or CIC or ASU)
IP is not as expensive as consumers might think (except for unusual personal circumstances)
via ABI/GRiD
of all individual and group claims were paid by insurers (for life, IP and CIC) last year
of IP claims were paid by mutual insurance companies in 2017
Insurers do pay out! (2017)
The total number of people in the UK covered by group policies in 2017*
The number of people in the UK covered by group policies in 2017 rose to 2.4m*
The increase in the number of in-force long-term disability income policies last year*
The number of in-force long-term disability income policies increased by 1.5%*
2.4m
1.5%
5.0%
The increase in the number of insured people in the group market in 2017*
In the Group market, the number of people insured increased by 5.0% in 2017*
Individual protection for absence due to mental health is available on the protection market!
*Source: Swiss re Group Watch 2018
10%
33%
on the same period last year
IP accounted for 33% of all Webline responses for period up to April 2018
35%
E-submissions (quote to app) for IP
from this time last year – March 2018 e-subs highest for three years
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DEBUNKING INCOME PROTECTION MYTHS
TRUST
ME,
I'M IN SOFTWARE
TRUST SOLUTION
I would confidently say that the front-end of a protection purchase looks almost there in terms of simplicity and accessibility but it still feels a little incomplete, if you consider the absence of a guarantee for the smooth payment of the amount of cover in place. We know that a trust is not a compulsory requirement of taking out a life cover policy. That is demonstrated by around only 9% of life cover policies being written in trust. And we know it can be completed after the policy has gone live. So, what is stopping the UK public from being made secure about where and when the money from a policy will go in the event of the worst happening? It could be a lack of adviser understanding, or the absence of a retention/contact strategy? Or the complications involved with trusts? Or it could be the fact that so far this has not been baked into the industry’s processes. Those buying life cover, however simple the product, still need help doing the right thing, so tackling the problem head on within the adviser market first should provide a sound testbed. Webline volumes continue to grow at a rate far in excess of the overall market change; despite this still only 50% of the UK mortgage market is protected by life cover. Convincing customers that insurers do pay claims remains a tough nut to crack and the industry is working tremendously hard to generate as many good news stories as it can to endorse the social good protection offers. One thing is for sure, if a trust is arranged, customers must have access to a very clear, legible trail of documents. Or if beneficiary nomination is in place, a reliable and proactive method of keeping details up to date is a must. So how can the digital world help? I would suggest investment in systems of course, but I would also say more is required in collectively agreeing how the industry tackles the issue. This can only be done if we all collaborate with a clear and shared vision in place.
CUSTOMER DEMANDS
Getting agreement from all providers could be time-consuming and adding in some form of trust wording would require much legal input, so such a move would still come with some complications and greater scrutiny, but one application serving more than one purpose doesn’t feel too onerous in the digital space. Yes, there are subtly different underwriting questions on different provider application forms but the value of these differences needs to be challenged for the good of the customer. Providers have managed to agree a standard application form for annuities so why not protection? Technology can play a part in enabling this transition now and in the future, perhaps a chatbot service could be developed to talk the adviser or client through the application process and be on-hand to answer questions there and then. Embed trusts and beneficiary nomination into applications now and not only are we helping advisers and millennials in the current world, but we are also providing a great platform for future generations, who will - actually, who already - demand almost everything in a digital format. Of course, with any customer-facing development, we should be asking customers how they would react to more digital advances in life insurance and the options for trusts or beneficiary nominations, but this will start the process of designing solutions better suited to what customers want by listening to them, acting on their suggestions and generally committing to making products and processes easier to understand. But it will take time…
PAYOUT PLANNER
From a digital perspective, the odd on-screen pop-up here and there extolling the virtues of arranging a trust is no longer enough, and fleeting references in any supporting call script will not hit the spot when a customer needs to be explicitly aware of the importance of arranging a trust, should the worst happen. However, the technical details of a trust remains far too complicated for many customers. Hence, the recent move by Guardian with their ‘Payout Planner’ – the option of a nomination of beneficiaries section in their application form – is the first step in insurers taking a more proactive approach to ensuring probate is not an issue at claim. So, as I challenged the industry at the recent Cover Protection and Tech Forum, as an industry we need to work together to introduce one application that satisfies all providers and follows Guardian’s lead by having a nomination of beneficiary section or a fuller trust arrangement. One application, one consistent ‘get beneficiaries paid fast’ message and a customer having more confidence in protection products by seeing commitment to getting claims right from all insurers across the UK.
T
he emphasis on life insurance trusts is picking up momentum with a major development recently announced by the re-emergence of a familiar and trusted brand.
This exciting development focusing on planning where the proceeds of a life insurance policy end up has certainly pricked up the ears of many commentators and so it should – it’s a great move. Bear in mind, that this is also against the backdrop of others making in-roads with their systems beginning to digitise the completion of a trust form, it is probably safe to say that trusts have never been a hotter topic when we see the innovation being applied to this traditionally manual element of policy establishment. We’ll all agree that we should be changing as fast as our customers’ needs evolve, if not quicker, and coupling this approach with building trust and confidence in protection will allow providers to remain innovative in such a highly competitive landscape. And, it isn’t just the traditional financial institutions jockeying for position but new fintech players are regularly entering the market to challenge the status quo.
Paul Quarendon, new product development manager at Synaptic Software, discusses how life insurance trust innovation can help secure consumer confidence in today’s highly competitive landscape
Have we created a ‘trust’ problem for ourselves by concentrating so much on making the purchase of protection a lot easier and ignoring the trust issue?
Smart phones, renting and social media: Analysing protection needs for a new generation
In the video below, Synaptic Software explores how to meet the protection needs of Generation Z
Paul Quarendon, new product development manager for Synaptic Software, asks: does vaping make you a smoker?
But, what constitutes a smoker? It seems so broad ranging nowadays. I’ve never been a smoker but what I do know is that it was a whole lot simpler in the olden days. When I say, “olden days,” of course I don’t mean back in 5000BC, when the inhabitants of South America chewed on the tobacco leaves they had grown but more recently when cigarettes, cigars and pipes were the most common ways to satisfy one’s nicotine habit. That seems like the distant past, as we are now presented with a new and diverse range of smoking devices. We have had access to licensed nicotine products, such as patches and gum for some years now, intended for those who may be struggling to completely give up smoking, but the in-vogue smoking accessory sweeping the nation still seems to be the vape.
here’s a quote - “Smoking is one of the leading causes of statistics” - that I would hazard a guess is something reinsurers, actuaries, underwriters, and claims managers
agree with.
“I have tried the gum... It tasted awful and made my throat feel coarse, they were not a good replacement and only gave you nicotine. I think half the problem is the habits people develop, a morning smoke isn’t replaced by a morning patch!”
>80%
30,000
of those are directly related to smoking
Around
people die in the UK each year from lung cancer
“Vaping is healthier in my opinion as it has fewer chemicals, tastes better, smells better, is less anti-social and my sense of taste has returned! You can also regulate the strength of the nicotine you put in the juice which means you can cut down slowly to 0% nicotine depending upon whether you want to give up the nicotine intake completely.”
ERRING ON THE SIDE OF CAUTION
Given we have discovered that vapes can contain nicotine, it seems good advice to disclose all details. This means that full disclosure is still king when completing an application form, whether that’s online or on paper, and the advice remains – don’t let a customer lie as it may have a detrimental effect on their ability to claim, should the need arise. In the digital space, it can be a straightforward change to adapt the question to whichever provider’s product is being purchased or quoted for, and it wouldn’t take a great deal of additional effort to address the odd leftfield question. For example, what if the applicant hasn’t smoked a tobacco product in the last 12 months but has started to use a vape instead? How would you answer the ‘smoker status’ question on an application if it was light on the detail required? On paper, this question would probably require a call into an underwriting helpline or a note inserted onto the form. Digitally, it is easier to accommodate such queries. With the jury still deliberating, findings from the medical profession will go a long way to clarifying the real differences between smoking and vaping, and insurers and reinsurers alike, will be able to apply the same rationale across all protection products, but for the time being, while we await outcomes with baited, and minty fresh, or blueberry, or vanilla breath, let’s err on the side of caution.
SO HOW IS THE UK INSURANCE INDUSTRY TREATING VAPING?
It is difficult to establish the long-term effects of e-cigarettes due to the length of time we’ve had access to them, but early signs are indicating that these devices are not necessarily being used as cessation aids but alternatives to smoking, and as such insurers are classifying them within the same bracket as smoking. It is fair to say that not all insurers’ application forms ask the ‘smoking’ question in the same way or drill down to the same level of detail as others. Some list the different nicotine replacement products such as gums, patches, tablets, sprays and electronic products, while others are lighter on the detail only mentioning an e-cigarette as a replacement product. If conclusive medical evidence has yet to surface, and it is only customers’ views that are readily available, surely the best guidance a customer can receive is that you will need to assume a blanket approach as insurers are doing. Knowing in advance how each insurer treats vapes in terms of their policy conditions and restrictions would help and we mustn’t forget that cotinine tests are still commonly used to determine if any nicotine exists in the customer’s system.
But the jury is still out on whether vapes are a healthier alternative to cigarettes. Invented to create the sensation of smoking, they don’t contain tobacco but do usually provide a dose of nicotine. The addictive nature is diluted given the reduced amount of nicotine contained within the liquid that is heated up to produce the vapour. Research has recently found that around 2.9 million adults in the UK use a vape, of that figure over half have given up smoking tobacco completely. Couple this with current evidence suggesting that vapes are 95% safer than inhaling tobacco, even to pregnant women, vapes are not intended to be used alongside cigarettes but to replace them, and are best consumed as part of an overall stop smoking programme. So, if they’re safer, will vaping help reduce the death rates caused by smoking tobacco? Around 30,000 people die in the UK each year from lung cancer. More than 80% of those are directly related to smoking. Out of the 120,000 people in the UK dying from heart disease every year, about one in six of these can be attributed to smoking. The list goes on.
Areas for eProtection advisers to keep an eye on
TAKE FIVE:
FIVE:
TAKE
1
REHABILITATION
Gone are the days of insurers serving only as a vehicle for collecting premiums and paying claims. For income protection and critical illness cover (CIC) these days, rehabilitation increasingly sits at the heart of policies to ensure that individuals diagnosed with an illness or signed off work are given the help they need to make a recovery and return to work as quickly as possible. Rehabilitation services are offered by insurers or through third-party organisations, such as Best Doctors, RedArc and Square Health, provide people with extra support; therapy, CBT and counselling for mental health problems, second referral diagnoses and wellness services, all add additional value to the financial benefit of an insurance policy.
2
OPEN BANKING
The emergence of open banking offers a compelling opportunity. Think: digital banking apps with a difference. Rather than benefiting from interest gained from credit or lending, open banking is geared towards helping customers budget better and in the long run save money. Imagine if insurers were entitled to offer protection products as part of these services – much like the way bancassurance is offered by banks – at the swipe of a smart phone. It would unlock unseen potential for all protection products as customers find themselves redirecting what they save each month towards covering themselves and their families financially. “For some time, Intelliflo and True Potential have offered personal finance management capability – the precursor to open banking – as part of their software,” says Paul Quarendon, new product development manager for Synaptic. “The introduction of open banking will allow all practice management software suppliers to introduce insightful budget support for advisers’ clients and I would encourage them to consider this as a matter of urgency.”
3
ARTIFICIAL INTELLIGENCE
Artificial intelligence is a broad term that encompasses an ability for a computer programme to operate in a way similar to the human brain – i.e to think. This is often referred to as AI or machine-learning. So what does this all have to do with protection? And more importantly, how is it relevant to advisers? Think of it this way - these are the tools needed to transform a protection adviser into an eProtection adviser. The use of data to generate leads, robo-advice as well as portals and platforms to help research and recognise clients’ financial health represent an opportunity to speed up and maximise the distribution of products. It’s the future of protection advice, so don’t get left behind!
4
GENERATION Z
As we’ve already covered in this eBook, in the Synaptic Guide to Generation Z video, “millennials” may be the buzzword today when it comes to distributing protection products as they take out mortgages, life cover for their families and income protection (despite working flexible hours and often from their homes) – but it’s Generation Z that is next in line. “Generation rent”, as they are often called, with their unpredictable earning patterns and engrained reliance on technology going forward will need protecting in their droves, so make sure you’re ready.
5
EMPLOYEE ASSISTANCE
Pensions, group life assurance, group income protection and employee benefits such as corporate gym membership and cycle-to-work schemes are nothing new. However, with the onset of pension auto-ennrolment, there is more need than ever for employee benefits consultants to extend their role. They will be needed to continue communicating the full value of these packages and to extend their offerings so employers can provide more support for the wellness of their employees. Employee Assistance Programmes (EAPs) are online portals that could provide the answer. They offer employees the opportunity to select a menu of benefits all in one place – whether this is psychotherapy, online GPs or, as in the case of Apple, an entire health service for its workforce…
Click on a number for insight
Synaptic has been supporting the latest fintech and next generation distribution models for the last 20 years and is constantly evolving ready for tomorrow’s customers’ needs. If you would like a free trial of Synaptic’s technology call 0800 783 4477 or email sales@synaptic.co.uk