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UK Retail Protection: Opportunities and Challenges

Extracted from an overview of the UK Retail Life Insurance Market. Please send me an email at richard@forske.com if you would like a complimentary copy of this overview.


UK Retail Life Insurance – Opportunities and Challenges


Opportunities:

  • One of the major opportunities for providers is likely to be through innovating around the customer proposition and catering more specifically for segmented customer needs. This can be done through core product changes or more easily via the supporting value add service offering (for example, using specific value add services to tailor a proposition for teachers or doctors). To develop this with a customer centric approach could be achieved with a proposition innovation team that utilizes methods such as design thinking.

  • Operating cost reduction remains an important area of focus for many providers with lower costs flowing through to greater pricing flexibility or margin improvements. There are a variety of ways to take out costs, but making a step change can be achieved via the automation of various operational processes, increasing the “straight through” rates of new product sales and providing tools to allow advisers and customers to self-serve.

  • The predicted growth in new platforms supporting wider eco-systems of services, suggests a potential need for new ways to engage with these platforms and adapting the products sold. As an example of this, Anorak is a start up providing a guidance tool for life insurance decisions (which has raised a significant amount of investment) and announced a partnership with Starling Bank (a new digital bank) amongst others.

  • The aggregator channel has seen significant growth in recent years and the aggregators continue to invest here, notably with MoneySupermarket partnering with UnderwriteMe on a pre-underwritten “buy now” solution. While only suitable for Term and Critical Illness products, it is well worth providers spending time to optimize their presence on the aggregators and develop the pricing sophistication (as the General Insurance market has done) to effectively compete.

  • Since Partnership exited the Life Insurance market with its product targeted at people with certain medical or health conditions requiring more focused underwriting and typically high premium loadings, there remains a potential gap in this specialist area of the market. This may be suitable for a provider who has significant underwriting expertise working with a reinsurer with appetite for the risk.

Challenges:

  • In the short to medium term competition will be focused on the factors such as price, distribution reach and ease of doing business. These factors both point to the need to have invested in adequate technology platforms which allow high degrees of automation, slick underwriting processes and also a well-designed, intuitive adviser and end customer experience.

  • The cost, complexity and time to deliver these system investments could be argued to favour the larger insurers who may have greater available resources to commit and whose scale will support the investment business case more readily. There is then a potential risk that the smaller providers cannot keep up with the level of investment and see a growing capability and operating efficiency gap which they can’t then afford to close.

  • Arguably there has so far been limited innovative disruption in the individual life insurance market but there are emerging trends that have the potential to create significant change and which are attracting start-ups with capital backing. Current providers and advisers need to stay alive to these trends and look to work with them, potentially through trialling new propositions or partnering with the firms innovating. The risk for smaller providers is that they don’t have the capital to invest in new innovations or that they are less attractive to partner with than the larger providers who may have set up specific innovation capabilities.

  • The potential for significant growth in direct to consumer life insurers arguably remains limited with the need for a recognizable brand and with high customer acquisition costs in traditional marketing channels. There may well be more potential in participating in wider digital ecosystems as platforms develop and accessing an existing customer base which is potentially more cost effective to target.

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