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'Traditional forms of protection are swiftly becoming outdated' - Justin Taurog's outlook for 2024

Published: 17/01/2024

In the year ahead, the protection industry can play a vital role in not just helping people become more financially resilient but healthier too. However, the industry must keep evolving to meet the changing needs of consumers and their adviser, writes VitalityLife Managing Director Justin Taurog.

2024 is set to be another unpredictable year, with the UK facing ongoing economic and health challenges.

With rapidly changing consumer needs, technological advancements and wider trends set to shape the future of protection and financial advice, the industry is at a crossroads.

In the aftermath of the pandemic, the last couple of years will be remembered for the significant economic challenges the UK has faced. And the next 12 months are expected to be no different.

“By challenging and rethinking the current protection model, we can help make the UK healthier, as well as more financially resilient in 2024”

- Justin Taurog, Managing Director, VitalityLife

Uncertain times

Soaring inflation and rising interest rates, combined with the cost-of-living crisis have squeezed household budgets at a time when financial protection is also more necessary than ever.

At the same time, population health has been declining, with record numbers out of work due to ill-health1 and unprecedented pressure on healthcare services2.

The way people live and work has also gone through a period of rapid change, whilst technological innovations continue to have a profound impact on our lives.

Shifting regulatory landscape

The introduction last year of the FCA’s Consumer Duty has also reinforced the shifting demands on our industry, placing the emphasis on delivering good consumer outcomes and avoiding foreseeable harm at all stages of the client journey.

We increasingly see that advice needs to be much more consultative, with more focus on holistically addressing client needs to properly evidence value.

This in turn will generate better client engagement and loyalty, which is particularly important given the ongoing concerns around retention and market growth. Our own data reflects this, with a 39% reduction in lapse rates for our most engaged members3.

Quality not price

A new regulatory landscape, combined with the wider trends shaping our world, means that product quality rather than price is more important than ever.

Recent analysis from Protection Guru served to reinforce this, with more comprehensive products like Vitality’s forming part of an adviser’s comparison when quality is selected over price.

According to their findings, consumers also overwhelmingly preference quality over cost when presented with the choice.

Calls for product innovation

With a focus on product quality comes the need to also consider whether products are fit for the 21st century. Towards the end of last year, we were hearing far louder calls for greater product innovation in the market.

It has become increasingly obvious in recent times that the more traditional forms of protection insurance products are swiftly becoming outdated.

The new generation of insurance products must align with the trends shaping our world, whilst moving away from a transactional approach to insurance, where risk is treated as static and the client see’s little value beyond the promise of a pay-out in the event of a claim.

The future of critical illness

Critical illness cover in its current form is unlikely to be sustainable given the advances we’re seeing in medical science.

Improvements in earlier diagnostics, treatment outcomes and survival rates, as well as increased re-occurrence, highlight the growing need to shift to a more severity-based approach across the market, with payouts based on impact and allowing for multiple claims during a client’s lifetime.

Our own claims experience bears this out, with 1 in 12 claimants in 2022 having previously claimed on their plan and over £3m paid to members in secondary Serious Illness Cover claims4.

It’s clear as well that the industry must do much more to tackle the growing later life care crisis in the UK, which will only worsen in 2024 as rates of dementia continue to rise5.

In the absence of any meaningful alternative measures, it’s also vital we continue to consider how we cover the potential for care costs that are increasingly likely to arise.

As Greg Levine recently wrote, it’s clear critical illness cover needs more than just a name change.

Building on income protection success

It’s been positive to see the recent uptick in interest around income protection. IP sales have continued to grow according Swiss Re’s annual Term and Health Watch report6, whilst groups like the IPTF have supported industry-wide collaboration to raise awareness7

For Vitality, we saw record IP sales in 2023 off the back of our product enhancements and I hope we will see continued growth in this area.

However, this too is an area of the market that needs further innovation for it to remain fit for purpose.

In recent years, the way people work has changed dramatically, especially as people have reassessed their working lives during the pandemic and beyond. With more people self-employed or earning irregular forms of income, there is now a far greater need for product flexibility, such as the ability to easily change cover through GIOs or more certainty of benefit payments in the event of a claim through an Earnings Guarantee.

If, as predicted, IP sales are set to outstrip critical illness, we also need to ensure parents have more choice when it comes to ensuring their whole family is protected. It’s one of the reasons why Vitality pioneered offering standalone children’s cover as a bolt-on to any adult plan.

Prevention, prevention, prevention

Last but not least, we’ve seen how the health of the nation has been declining in recent years and this is having serious economic consequences8. The growing burden of preventable ill-health can no longer be ignored.

As well as offering advanced forms of cover, we must do more to prevent illness from occurring in the first place, alongside ensuring clients have a financial safety net at a time when it is more needed than ever.

To better support the health of clients, long before a claim arises, we must focus much more on upstream interventions, by initiating sustainable behaviour change from day one, rather at the point at which a client is already unwell.

By challenging and rethinking the current protection model and helping to make the UK healthier, as well as more financially resilient, our industry can have a transformative impact for both individuals and society at a time when this is more needed than ever.

Find out more about how Vitality's suite of personal protection products can offer more relevant, comprehensive cover for your clients.

Where to next?

  • Critical Illness Cover needs more than just a name change

    Given the rapidly changing needs of clients, critical illness cover needs more than just a rebrand, writes Greg Levine, Chief Operations and Growth Officer at Vitality.

  • To close the protection gap IP needs to work harder

    It's essential that income protection meets the needs of today’s consumers and their adviser – not yesterday’s – writes Rob Harvey, Vitality Adviser Editor.

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