Added-value benefits have become a common feature on many protection policies over the past 15 years, offering everything from shopping discounts to bereavement counselling. But many believe these extras are set to become the core part of the protection proposition, with the insurance becoming an add-on.
A recent poll by Protection Review illustrates the support for this switch. It found that 60 per cent of respondents could see a time when today’s added-value benefits became the core product. A quarter of respondents did not believe this would happen, with 15 per cent undecided.
Roger Edwards, managing director of Roger Edwards Marketing and marketing director of Protection Review, is not surprised by this finding. He was at Bright Grey, now part of Royal London, when it launched its added-value benefit, Helping Hand, in 2003.
He says: “I can remember talking about the possibility that one day people would buy Helping Hand as that was what they wanted, with the insurance element as the bonus. It has not happened yet, but we are on the trajectory.”
Adding interest
Certainly, the race to offer the most comprehensive range of added-value benefits is well under way, with insurers including a variety of services on their plans.
Health-related benefits are the most commonplace. These include medical information and advice services, second medical opinions, health and wellbeing support, GP helplines, and counselling services. Other common adds-ons include legal and debt management helplines, and support to find child and elderly care.
Some providers also offer rewards. Discounts on shopping and gym membership are relatively common, but Vitality takes it a step further by offering members rewards, such as free coffees, cinema tickets and discounted Apple watches if they engage with its health and fitness programme. This sees it handing out around 4m Starbucks coffees, more than 1m cinema tickets and 100,000 Apple watches a year.
Most add-ons are included free, but a few insurers also have paid-for extras. For example, Legal & General’s GP24 Service is available for an additional £3.25 a month on its critical illness insurance. This gives policyholders access to a GP anytime and anywhere in the world.
Aviva also offers a couple of optional extras. Its global treatment option provides up to £1m of cover a year for treatment of serious conditions such as cancer, bypass surgery and bone marrow transplants, while its fracture cover gives up to £6,000 plus physiotherapy support for any of 18 different breaks. Each of these is available for an extra £4 a month on its protection plans.
Becoming core
Turning these from added extras into a core proposition may require a complete product rethink, but there are plenty of reasons in its favour.
Mr Edwards notes: “People do not want to think about the possibility of serious illness or death; the added-value benefits are much more appealing. Consumers would much rather know they have someone they can contact for support, rather than that one in three of us will get cancer.”
The other key benefit of many of these added-value benefits is that the policyholder can use them without experiencing a medical issue. Although some services are linked to claims – for example the rehabilitation support included on income protection – others, such as the second medical opinion, can deliver real benefit to policyholders and their families at any point in their lives.
Promoting these benefits is not entirely altruistic. Where policyholders make improvements to their health as a result of added-value services such as discounted gym membership or online nutritional and lifestyle information, it can also benefit the insurer by decreasing the risk to them.
As an example, according to Vitality Life, a member who is very engaged with their programme is 54 per cent less likely to suffer a serious illness. Similarly, they are likely to live for an average of eight years longer.
Deepak Jobanputra, deputy chief executive at Vitality Life, explains: “Changing policyholder behaviour results in fewer claims. There are also societal benefits as these individuals are less of a burden on the welfare state.”
Primary insurance
While there are clearly benefits to making the added-value services the core part of the product, not everyone is in favour of such a switch. Alan Lakey, director of CIExpert, is among those who voted no in the Protection Review poll. “My clients want to take out protection, they are not interested in the added-value benefits. As a result, these extras have never influenced me when selecting a plan,” he says.
Mr Lakey also believes they can muddy the waters for advisers. With so many different options available, factoring them into product comparisons can become tricky. This is exacerbated by the fact that, even where the provider is the same, insurers can offer very different versions of their services to policyholders.
Some insurers are also keen not to let the added-value services dominate their product propositions. For example, although Royal London’s Helping Hand service is one of the most comprehensive, its senior product development manager, Jennifer Gilchrist, says protection must remain at the forefront.
“Advisers need to focus on their clients’ financial needs. The added-value services are very important and can help someone cope in a difficult situation, but the objective should be financial protection,” she says.
“Clients want to know they can pay off the mortgage or provide for the family if they die prematurely or are seriously ill.”
Putting the added-value benefits at the core of the product potentially has financial implications too. While these services remain in the background, awareness and therefore usage remains manageable, making it possible to offer them for free.
Mr Lakey says child cover on critical illness insurance is a good example of this. He explains: “A lot of people could claim on this but they do not realise they have cover. If protection is sold on the back of the added-value services, people will use them more and the cost may have to increase.”
Sharing the limelight
Examining some of the activity in the market around added-value services could indicate the role they might play in future product design. Vitality has incorporated these benefits more than other insurers, but it still sees the insurance as having a key role. “A lot of our policyholders do focus on the health and wellbeing benefits, but the proposition is as much about insurance,” Mr Jobanputra says.
“Insurance is not the most exciting topic, so offering these added-value benefits helps to engage consumers.”
Another area of the market hoping to make more of added-value benefits is income protection. Although its primary purpose is to provide a replacement income, claimants and potential claimants benefit from rehabilitation and support services that can help them return to work.
The value of these services was highlighted in the Seven Families campaign, as Ms Gilchrist explains: “The feedback from the families was that the financial support was secondary to the assistance they received, with this helping some of them return to work. The individual income protection insurers should market these services more: it is about providing good outcomes to consumers.”
This is in keeping with Mr Edwards’ views, too. Although he can see the merit in putting the added-value services at the heart of the product, he believes the switch will be subtle. “Over the next 10 to 15 years, the added-value benefits will become core. The product should never depart from its purpose to protect someone, but I believe we will see added-value benefits sold that include life insurance,” he says.
Whether or not the added-value services do take up the role of core product, the benefits they offer in terms of engaging consumers mean the protection industry should definitely make them a more central part of its marketing message.
