Direct insurance is on the rise. Peter Smith discusses the ways in which financial advisers can adapt and stay relevant.
There is no denying it – direct insurance will continue to grow.
Consumers are buying online. They are buying everything online – clothes, holidays, car insurance, even the kitchen sink.
They are buying life insurance online and as a new generation enters adulthood, we will see even more unique approaches to selling life insurance.
Consumers are driving insurance companies to change the way they market, distribute and design their products.
The life insurance industry in Australia has been designed predominately on the financial adviser model. Life insurers in Australia have viewed advisers as the customer and as a result, value propositions have been aligned to the adviser’s needs and wants.
The products designed have often been unnecessarily complex, making obtaining cover onerous and understanding coverage difficult.
The change is coming. As with other industries or companies, life insurance companies and financial advisers are rising to the challenge but we still have a long way to go when it comes to simplicity and access.
The major factors affecting the success of direct insurance globally have been centred firmly on advancement of technology, the active role of legislators and regulators, the overall attitude of consumers towards insurance and the perceived value of using a financial adviser.
In Australia, insurance technology is now as advanced as in most developed countries, and the industry has various legislative reforms proposed with the Future of Financial Advice changes – but attitudes to life insurance still remain low-key.
So is the industry doomed to be the new Kodak, or will insurance companies emulate an Apple Inc philosophy and drive a new way for the future?
The need for insurance remains the same – the change is in how customers will experience the purchase and delivery of that product.
The value proposition needs to be designed for the individual, so life insurance companies need to become more familiar and engage the customer. What does this mean?
In short, simple and easy-to-obtain products that provide value to the customer. That is the challenge.
Customers are taking and will continue to take a more active role in purchasing their life insurance.
Ernst & Young research report, ‘Voice of the Customer: Time for insurers to rethink their relationships’, suggests that while customers are still sold life insurance, there is an increasing ownership of the process them.
This research highlights that Australians are already conducting their research online but that the products are too difficult to understand, and product information is generally obtained by the financial adviser on specialist comparator services not available to the public. This will change.
As consumers drive providers of many products and services online, the information demanded by this informed audience will force insurance companies to simplify the product and provide a fast and easy purchase experience – or they will miss the boat.
The winners will be those companies who can shift their focus to the customer who is actually the one to whom they have made the promise.
That is, if the unexpected happens, the insurer is there to mitigate the concerns – both financially and psychologically.
If you understand as an insurance company who your customer is and what needs they are trying to address, you must provide a way for them to both easily access the product, and provide quick fulfilment that will deliver the peace of mind they ultimately seek.
The two most important components here will be education and technology.
Successful marketing campaigns will be those that have effectively addressed the consumer’s hunger for more information about what levels of cover they need and what products are available.
Those campaigns will also highlight how technology can be used to easily access both the information and the cover itself!
In addition, the use of analytics to help insurance companies offer the right product to the right customer base will continue to be an emerging and powerful tool in connecting with customers.
The life insurance industry is changing as direct insurance continues to develop and evolve. As an industry, we must start to think from the customer’s perspective because there is a massive shift in their buying habits.
Who would have thought 20 years ago that Apple would be the biggest distributor of music?
Will Google be the biggest distributor of insurance in the next decade?
Peter Smith is head of distribution at MetLife.
