Of all the protection products, life insurance is by far the simplest. But as it is often sold as part of a broader financial planning exercise, its lengthy, health-focused underwriting process can put off both advisers and clients.
As a bare minimum, clients are expected to answer around 30 questions, running through details such as their age, height, weight and medical history. While this is fairly straightforward for clean lives, throw in a previous health problem or a family history of something serious and the insurer will want to probe much deeper, with advisers required to ask for personal information about their client’s medical details. This can be time-consuming but, for advisers more accustomed to number crunching, gathering sensitive information can be awkward too.
Collecting and analysing this data also takes time, both for the adviser and the insurer, leaving clients sometimes waiting weeks for a final decision. In a small proportion of these cases further medical evidence will be required, which could mean waiting for a GP report, or for the client to speak to the insurer or attend a medical. As well as adding to the adviser’s workload, all of these time delays mean that clients can easily lose interest in taking out cover.
Application pressures
Clients can become disillusioned for other reasons during the application process. The quest to appear at the top of the comparison tables means insurers will often provide an initial quotation that is almost impossible to achieve unless a client has a completely unblemished medical record. Subsequently, when they are offered a premium that is double or treble the initial quotation, they can feel like they are not being treated fairly.
While this can be frustrating for an adviser, Emma Thomson, life office relationship director at LifeSearch, says it is also slightly ironic. “Price is rarely the issue with protection. Studies repeatedly show that consumers overestimate the cost of life insurance, with many thinking it costs two, three and even four-plus times what it actually costs,” Ms Thomson explains.
For example, research conducted by SunLife in 2015 found that, on average, people believe £100,000 of cover costs £50.98 a month, almost five times the average premium of £10.31. It also found that affordability was the main reason people had not taken out any life cover.
Regulatory requirements
Grappling with all these factors is made more challenging by the increased regulatory requirements associated with many areas of advice. This is particularly the case for advisers arranging mortgages, the introduction of the mortgage market review regulations in 2014 having made the advice process much more time-consuming.
Michael Aldridge, innovation director at London & Country Mortgages, explains: “The big challenge for mortgage advisers looking to sell life insurance is that they need to have two lengthy conversations with their clients. When someone has come to discuss a mortgage, having to find a further 10-15 minutes to introduce protection can put an adviser off.”
To address these issues, and ensure protection remains part of the advice process, insurers are developing simplified versions of life insurance. These include Aegon’s Simply Life, which was launched in 2013 and enables clients aged 18-49 to apply online for up to £500,000 of life and terminal illness insurance, with the application process stripped down to nine core questions.
