Few attempts to transform the healthcare and protection sector have involved as much investment and attracted as much publicity as the launch in July 2008 of real life cover by Fortis Life, but more than four years later the product is barely mentioned.
The concept designed by the firm – which changed its name to Ageas Protect in 2010 – in conjunction with specialist intermediary LifeSearch ‘to revolutionise the market’, combined a handful of different protection covers with the option of unemployment cover.
It was aimed at customers who knew they needed more than just term insurance but found it difficult to choose between the different types of cover available, or saw them as too expensive or complicated. The cover offered affordable essential protection throughout the customers’ working lives.
But while the rave reviews and awards flowed in, the sales did not. Ageas Protect acknowledged that “sales have been very sluggish” and that the “one or two” intermediaries, other than LifeSearch, selling the product were doing little business. Even LifeSearch referred to sales as merely “ticking along and nowhere near as big as standard life and critical illness sales”. So where did it all go wrong?
Steve Casey, head of marketing and propositions for Ageas Protect, cited the complexity of real life cover and the fact that intermediaries were wary of new things and disadvantaged by its inability to sit comfortably on their search engines. It is listed on Avelo Exchange under CI cover but is not on any of the others.
One cannot help feeling that it would not have been beyond the wit of man to detect such potential obstacles during the pre-launch research. After all Bright Grey, which took part in the early workshops and considered partnering LifeSearch, soon established that the product did not fit in with the way financial advisers felt protection should be offered.
But feedback from the market suggested that, while IFAs can often give a very positive response to ideas during research, projects frequently fall down when it comes to trying to persuade conservative network compliance officials to put products on their approved lists. Even advisers who think something is a strong proposition can therefore be put off by having to work harder to justify the sale to their network.
New products in the healthcare and protection sectors are, however, quite capable of bombing without IFAs or networks being involved. Virgin cancer cover, for example, attracted huge attention at launch in 2006 by aiming to provide a new form of CI product that covered only cancer. But by 2009 it had been withdrawn for new business. The delivery and marketing were understood to have been more to blame than the actual product design.
It is also quite possible to have a disaster even if you have the full support of the intermediary community. National Friendly’s healthcare deposit account, which was highly regarded by many private medical insurance brokers, was launched in 2006 as a unique PMI policy that offered policyholders fixed premiums and money back if they did not make a claim. But in 2010 the benefit structure was made significantly less generous and in 2011 National Friendly stopped selling the product, citing higher than expected claims experience.
With the sector littered with such precedents, health and protection insurers could be forgiven for wondering whether it is worth investing heavily in product development, especially as you cannot patent financial products to prevent competitors from stealing your ideas if you do in fact come up with a winning formula. Although it would mean sacrificing first-mover advantage, would it not make more sense to simply watch what others were doing and copy anything that works?
On the protection side in particular there have been few highly-innovative product launches that have proved successful in recent years. The menu concept, launched by Scottish Provident in 1996, was undoubtedly one and PruProtect’s severity-based serious illness cover, launched in 2007, was arguably another.
Peter Chadborn, director of specialist intermediary Plan Money, said: “PruProtect accounts for around 15 per cent of our CI-related sales and is definitely a success as it is still growing its market share at a time when many other providers are experiencing declining sales. The fact that partial payment facilities have caught on industry-wide has been a great development.”
There have also been some successful niche developments such as LV=’s mortgage and lifestyle protection plan, launched in 2008, which combined full income protection with guaranteed-rate unemployment cover, and Skandia’s rolling-term life cover, launched in 2001, which provided a halfway house between whole-of-life and term cover. The latter accounted for more than one-third of Skandia’s new protection business and is being sold by more than 300 intermediaries.
But most of the greatest success stories have involved mere product tweaks or process innovation, such as the development of tele-underwriting, using technology to get customers on risk more quickly and offering premium discounts for exclusions.
Examples of successful product innovation have, however, been more common on the PMI side. PruHealth, despite having to significantly dilute the attractiveness of its original offering launched in 2004, has established its Vitality concept as a mainstream option and smaller players such as WPA and Exeter Family Friendly have impressed with a range of ideas.
WPA’s ‘shared responsibility’, which provided an innovative alternative to an excess, was made compulsory on all its individual products in 2004, after its launch in 2002, and was heralded by the company as an “unmitigated success”.
The firm said that its mycancerdrugs concept, launched in 2007 to cover life-saving cancer drugs not available from the National Health Service and incorporated into the NHS top-up cash plan in 2010, has also done well. Also WPA’s corporate deductible scheme, which enables corporates to minimise insurance premium tax, is showing promise after a slow start following its launch in 2010.
Charlie MacEwan, corporate communications director of WPA, said: “The corporate deductible should have revolutionised everything by now but people were suspicious of something different. It was the same with corporate healthcare trusts in the 1990s and they have only really taken off during the past 10 years. Innovation takes time and but it is something that the industry has to do.”
Nevertheless, plenty of commentators argue that innovation makes life more confusing for consumers when the main barrier to sales is lack of understanding rather than faults with existing products. This school of thought has been gaining particular momentum of late.
Roger Edwards, managing director of Bright Grey and Scottish Provident, said: “For the first time in about 15 years I’m hearing more people actually saying we’ve had enough innovation and let’s go back to simpler basic things.”
But innovation and simplicity do not actually have to be mutually exclusive. Exeter Family Friendly, for example, prides itself on being innovative in terms of simplifying insurance and making it accessible.
Graeme Godfrey, managing director of specialist intermediary Best Go Private, rates its simple PMI plans health cover for me and health choices for me far more highly than PruHealth and described them as “the best new innovative products we’ve had for a number of years”.
So, although innovation was largely put on hold last year in the build-up to the retail distribution review and G-Day, maybe 2013 could turn out to be a year of both product innovation and simple products. It will certainly be interesting to see whether the Sergeant Review of simple financial products provides any worthwhile food for thought for product development departments.
Edmund Tirbutt is a freelance journalist
How real life cover works
The cover is made up of two ‘pots’ of money:
* A life insurance pot that will pay out if death occurs during the term of the plan.
* A living fund pot will pay for IP, limited CI cover, or child and partner carer’s cover claims during the term of the plan up to the overall sum insured. It will also pay for recuperation cover.
Key Points
Ageas Protect’s launch of real life cover met plenty of accolades when launched but has drawn few sales.
Feedback from the market suggested that, while IFAs can often give a very positive response to ideas during research, projects frequently fall down when it comes to trying to persuade conservative network compliance officials to put products on their approved lists.
Plenty of commentators argued that innovation made life more confusing for consumers when the main barrier to sales was lack of understanding rather than faults with existing products.
