Why the protection market needs to evolve

For protection, the mantra is similar - even if it is rarely articulated outside the HQs of the leading providers and distributors.

‘Price is king' is perhaps the single, key belief which has governed market thinking for the last 30 years. To win the race for customers, you need to win the race on price.

That's good news. Firstly, it shows that advisers are searching and achieving the most affordable premiums for their clients. Secondly, it shows healthy competition, providers pushing each other to win market share. It also highlights the role of the wider technology ecosystem and the importance of product sourcing and research tools, but I would say that, wouldn't I?

However, this keen price competition and margin ‘crunch' does come with a downside. You could argue it has come at the expense of other areas of proposition and process which have taken a back seat in priority and have failed to evolve along with consumer and adviser demand. Namely, processes.

This is a status quo that must change for the market to evolve and grow. You don't have to look far to see the impact and importance of process on the modern consumer - protection is no different, we need to simplify and re-engineer - to make the opaque transparent.

Transform

The success of portals proves the importance of centralised, efficient processes - a consolidation of time and effort to make a more efficient market. But despite this consolidation, there remains a huge amount of waste which needs to be eradicated to enabling the market of tomorrow.

Underwriting remains a disjointed, unknown process which for some (with medical disclosures) is often not exposed until it's too late, a recommendation has already been made. This creates inertia, confusion and mistrust - enemies of growth. So, the market of tomorrow needs to learn the lessons of the past. Price is important but price is not everything - falling premiums haven't driven overall growth. Improved buying processes have the power to do so.

Learn

Protection and data are synonymous, but for too long its power has been owned by too few. Provider pricing and actuarial teams have long benefited from huge swathes of data to drive effective and competitive pricing. The results have been impressive, see above.

But data can do much, much more to make our market more efficient and productive - and not just limited to manufacturers, but distributors also.

For example, data can now help all market stakeholders understand not just what the price landscape looks like across thousands of scenarios at any given moment, it can also drive better understanding of how changes in price can affect demand.

For providers, that offers the potential to not only predict potential gains or losses in new business volumes when premiums change but to offset this against any gain or loss in margin.

For distributors, this analysis can help better understand adviser behaviour. Who are those more sensitive to price, does that indicate an overreliance on a single factor, is further training required? Importantly it also enables distributors to identify where needs are potentially not being met.

For the protection market to realise the great potential that exists in the market long term, we need to continually evolve. A focus on data and process improvement are two areas I expect to be the battlegrounds of tomorrow.

The winners realise, or will soon realise that making better, more informed decisions and delivering a superior customer and adviser experience outweighs the benefits of winning a race to the bottom on price.

Paul Yates is product strategy director at iPipeline