Beyond bancassurance - Discovery Life's view
In the 1990s, bancassurance was seen as the way forward for life companies to grow their books and build market share. The idea was a simple one: life companies would take advantage of their relationships with banking groups to sell product through the banksâ€™ branch networks and sales teams.
The bancassurance model is essentially a distribution model, and herein perhaps lies its weakness. Even where it works well, it is simply a case of selling existing product to a larger customer base, with often little or no thought given to the actual needs of the customers.
More and more one is seeing a need to look at a new model, one which incorporates the needs and interests of policyholders more effectively. We see health management as an exciting basis for the model of the future, since a personâ€™s health risks are intrinsically attached to oneâ€™s life cover needs â€“ a healthassurance model, as it were.
I will return to this shortly, but first we need to look more closely at some of the background to the issue.
Recent developments in the life industry have highlighted the failure of the industry as a whole to put consumer needs at the centre of the life assurance model. Rulings by the pension fund adjudicator, for instance, have highlighted consumer unhappiness with the appropriateness and value-for-money of many products offered to policyholders. This has led the industry to reconsider its practices.
Not surprisingly, the recent PricewaterhouseCoopers survey into the insurance industry has placed consumerism as an increasingly important driver of change for long-term insurance companies, behind regulation and the Financial Services Charter. It would come as no surprise if consumerism grows in importance.
As stated above, bancassurance works well as a distribution tool, but it cannot address the underlying issue of products that address consumersâ€™ needs.
The model of the future for life insurance companies needs to be one which incorporates client needs in a dynamic and innovative way. Ironically, this new approach is not new at all, but rather a return to the life industryâ€™s roots.
Life insurers used to be good at life cover, applying their skills in product design in absorbing and reallocating risks. Life companies need to go back to this approach, but apply new techniques and skills to it, in order to meet client needs in a dynamic way.
Indeed, this approach has been at the heart of the best innovations in the sector in recent years, such as disability and dread disease cover. Life companies now treat dread disease as a form of accelerated life cover, and price it accordingly â€“ to the benefit of policyholders.
Equally, applying this approach to retirement products â€“ for instance applying unneeded life cover at retirement to boost retirement income â€“ can address the very real need to improve the lot of policyholders.
Many of the risks a person will typically seek life cover for â€“ death, disability, education needs, severe illness and retirement needs â€“ are all impacted by a personâ€™s health. And there are few issues as emotive and fundamental to an individual than oneâ€™s health and that of oneâ€™s family.
This is where the â€œhealthassuranceâ€ model comes in, since it plants health management foursquare at the centre of the life offering.
Our experience has shown that participation in a wellness programme by a policyholder reduces that policyholderâ€™s risk of mortality or morbidity by a significant margin. It makes sense then to encourage policyholders to look after their health and to make it worthwhile â€“ in the form of lower insurance costs or improved benefits â€“ for them to do so.
Healthassurance is already working well in winning back the confidence of the consumer. And it presents a wonderful opportunity for the industry to grow and add value for policyholders.
Herschel Mayers - CEO Discovery Life
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