Insurance changes to throw curve balls to industry
Staying ahead of the curve on the technology, consumer and regulatory fronts can help our industry to quickly adapt and prosper. Brett Clark writes.
Just as you thought our industry could not possibly digest another acronym, along comes two new pieces of jargon: B2B2C and SoLoMo
What’s that, you say?
The first is a relatively simple but important term that underscores a new age for financial advisers and others doing business in our fast-paced, online world.
The rise of hand-held devices such as tablets is creating unique opportunities for the simultaneous and transparent interaction between advisers, financial services businesses and the end consumer.
SoLoMo is an abbreviation for a big concept: the convergence of various trends (social, local and mobile) and the enormous potential impact these have for doing business in the digital environment.
Imagine the power of location aware technology which links you into a preferred social hub, provides customised sales and customer data, wrapped up with local area marketing tools.
All players in the financial services value chain – from advisers through to product providers – must keep a close eye on these and other emerging technology trends such as the speed by which online, tailored insurance products are placing more power in the hands of the consumer.
We need to keep pace with these emerging trends, while also remaining focused on the big ticket consumer issues, like the ongoing fight to address Australia’s chronic underinsurance problem.
Prioritise for prosperity
On the face of the raw data, it’s worth reminding Australians we have a somewhat peculiar order of priorities.
An overwhelming number of us (almost nine in 10) have insured our motor vehicle. But only around three in 10 Australians have taken out insurance on their personal incomes. To me, protecting the car but not the breadwinner seems more than a little bit counterintuitive.
The scale of the nation’s underinsurance problem has improved over the past five years, yet remains a lingering issue.
And the underinsurance problem has received quite a bit of attention over recent years. So let’s introduce another new term - the “under-advised” problem. Only around one in five working Australians receives financial advice.
If we set about solving the under-advised problem, underinsurance will look after itself.
Perhaps a good way to think about this is to step back, control the things we can, and – taking the size of the under-advised or the underinsurance gap as a prime example – start to measure the potential upside of remaining focused.
After all, if you are an adviser, your focus is one of the qualities that matter most to your clients, your business partners and probably your own sense of wellbeing in the current environment.
Another is trust. Trust that you understand and can reinforce with clients the job you are here to do; the trust that clients place in you to deliver to their specific needs.
A little trust goes a long way
In TAL’s area of focus, life insurance, trust has plenty of upside. Our research shows that only 5 per cent of consumers value their life insurance ahead of other insurances.
The irony in this number is never lost on us, considering the importance of protecting the most valuable income-producing asset – that is, the person; not the home and contents.
It’s the human being required for raising the income to pay for these things that deserves protecting.
When it comes to life insurance, the conversation about mortality can often be awkward. At an emotional level, it’s not an area many of us want to contemplate.
But, again, the numbers show there is a glass half full waiting for our response.
The good news is that the underinsurance gap is closing. The Rice Warner Underinsurance report in 2005 showed parents with dependents were critically underinsured by $1 trillion, but by 2011 the figure had dropped to just $669 billion, according to a report from Rice Warner Actuaries.
Using this positive story to help close the gap even more is our biggest opportunity.
Change at warp speed
The idea of a world living with omnipresent change is now so common it has become a bit of a cliché.
Yet dealing with change is no less challenging, and in recent years the financial services industry has witnessed (and been forced to react to) change of an unprecedented scale and speed.
At a granular level for our industry, the Federal Government wrestles with how it should best introduce the changes outlined by a raft of related regulatory reform.
That acronym on everyone’s lips – FOFA – has provided an atmosphere for change where we all hope that the real task of doing business is not starved of oxygen.
Again, thinking about the benefits of any new regulation, it seems prudent to focus on the opportunities to deliver to a better informed, well-educated consumer with a watertight, compliant package of product and services that reduces business risk and heightens client experience.
So as the industry keeps one eye fixed on Canberra, the other is firmly following the risk insurance market to ensure it continues to provide the most competitive products and services to both advisers and consumers.
These products and services must respond not only to industry changes, but also to the increasing cost of living confronting consumers.
And just as we think we have a handle on those customer needs and wants, enter the new age of highly selective, value-driven consumers, supported by a world that moves progressively more ‘online’ every day.
With all this change, it would be easy to feel a little overwhelmed.
Yet the most obvious opportunity comes with staying calm amid the rapid pace of technological, consumer and regulatory developments.
Yes, your clients may be increasingly tech savvy, price and product conscious. The most scholarly might even challenge your intricate knowledge of policy terms and conditions.
But there is no denying these empowered, online individuals still value the old school certainty of talking to their trusted adviser knowing that their personal situation is in the best of hands – no matter what.
Brett Clark is the chief executive officer, retail at TAL Limited (formerly TOWER Australia.
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