Tower's David Denison explains why life insurance products are updated.
One of the complaints received from both inside and outside life insurance companies is the fact that every six months or so products are changed.
This also costs advisers time and money as they attend roadshows and stay up-to-date with the details of product enhancements. Additionally, their support staff must organise the ordering of new product materials.
It also costs the life insurance company a lot of money.
Executives must attend roadshows, core product documents such as the Product Disclosure Statements (PDSs) must be prepared and printed, online systems must be updated, and product teams must spend months preparing and assessing each change.
Just about the whole business is involved and costs mount up.
So why is it done? Why can’t life insurance companies simply put one product on the market and leave it there?
The principal reason for regular updates is that it gives the consumer choice and added benefits. As products mature, research identifies gaps in the offering. These gaps are usually due to changes in circumstances.
For example, an ageing Australian population increasingly wants life insurance cover until age 70. This is now a common feature.
Medical science is also advancing and these developments must be assessed and incorporated in products where appropriate.
New diseases occur, such as meningococcal, which require insurance cover. Then there are changed actuarial assumptions. Australians are living longer and this affects the pricing structure of each product.
Then there are technical advances. A prime example has been the development of straight-through-processing when it comes to applications.
Many companies used to simply put a computer on the front end of the application.
Now, almost everyone in the industry is taking the automated route.
A key advantage of all this has been that it has made life simpler, and the application and approval process faster, for the adviser and the customer. There have been big savings in that area for all.
As each of these developments has occurred, upgrades, updates and roadshows have become necessary to enable advisers to give the best possible service and the best possible products to their clients.
We all know Australia is one of the most underinsured nations in the developed world. This was perhaps indirectly highlighted recently when the Investment and Financial Services Association held a life insurance day seminar.
Attendance by more than 300 advisers and industry representatives far exceeded expectations.
The interest in life insurance is high and the products and services must be there to meet that need.
Consumers are increasingly recognising the need for cover, but when they do apply for financial protection through life insurance they do not want the application process to be arduous and time consuming – and neither does their adviser.
Consumers need to be able to buy life insurance when they need it and in the form they want, simply and easily.
And the consumer certainly doesn’t want a product that only partially meets their needs, or is lagging behind in many areas.
Today, consumers have a wide range of choice in a wide range of areas and the life insurance market, often thought of as being a bit ‘old-fashioned’, has not been left behind.
For those in the know, it is really a very modern and changing industry.
This is reflected in the industry’s ability to meet consumers’ needs.
The choice by the consumer in life insurance also extends to the different companies offering different products. It is a competitive market out there, and products are also changed to leapfrog ahead of the competition — or at least match it.
Again, this is to advisers’ advantage in terms of offering consumers a wider range of choice. As a result, the role of advice becomes more valuable to consumers.
Product upgrades are an advantage for existing and new clients because the upgrades are effectively product enhancements and increased cover provided at no extra cost.
So the next time someone complains about more roadshows, more upgrades and more PDSs, remember that this is principally for the benefit of the client — and that advisers win too.
David Denison, head of product and marketing of retail life at Tower.
