How valuable are added benefits on protection policies?

Dave JonesEpoq’s Dave Jones explains why added value benefits on protection policies matter. This article first appeared on the Cover Magazine website in April 2016.

Imagine you’re driving alone at night in a downpour. The engine splutters and gasps its last and you pull over into a lay-by.

You’re not mechanically minded and the conditions mean it’s impossible to be making your first attempt at fixing a car!

Luckily you’re a member of a well-known breakdown service. So you call them up and give them your policy number and it is good news – they’re putting a cheque in the post to cover the repairs! The only problem now that you’re stuck miles from home – the cheque isn’t of any use right now.

This analogy is an accurate reflection of the Life market. The amount of claims paid versus claims declined is far better than the general public believe and, while paying claims is the most important thing an insurer can do, it’s not the only area where they can provide value to advisers and their clients.

There are also simple yet important areas where insurers can help clients’ families in the event of a death claim, or help the insured person directly in the event of a critical illness or income protection claim.

With retention being so important, I’d suggest there is also a third area that is important, which is attaching free added benefits to policies that can be used whether or not they claim.

People often see protection as a gamble – ‘if I never claim haven’t I just wasted all my premiums?’ If they have an added benefit attached to the policy that they can use and use regularly they will see value straight away and keep engaging with the policy, making it less likely that the policy will lapse. Vitality’s rewards program is a good example of this type of approach.

It was with this in mind that we conducted adviser research in 2015 to see how important advisers considered these type of benefits to be.

Of the participants, 94% said that added benefits were valuable to clients, with the most popular reason being that it helps with sales (56%).

As Epoq specialises in both online and phone-based legal services, we also asked whether a comprehensive legal service that goes beyond the standard helpline service and offers policyholders an easy and efficient way to handle legal matters – like making a will and power of attorney – would be valuable to clients. This time 81% said that it would be valuable.

Advisers also believe that clients do use these added benefits. When we asked how many clients would use them, comments that we received included: “100% -If they’ve paid for it and are aware it’s included I don’t see why they wouldn’t use it”.

Another adviser suggested that a free will writing service would be used by around 50% of clients while counselling services would be used slightly less.

Finally we asked ‘Should insurers do more to remind clients about these added benefits in their ongoing communications and marketing?’ The response was unanimous – 100% said yes.
Across the market this suggests that insurers who want to succeed with advisers need to consider useful additional benefits attached to their policies, but they should also be reminding the clients they have these benefits.

It means that the policy becomes about more than just the possible pay out.
In our conversation with advisers, online help in areas like trusts, power of attorney and wills, and good communication around them, appear to be highly valued.

The insurer who offers more than a cheque in the post would seem to be the insurer that’s going to be leading the pack in the coming years.