Nick Telfer: Clients need actual value - not 'added value'
To really deliver value, protection should offer more than just additional services near – or at the point of – claim, writes Vitality’s Nick Telfer
The evolution of protection policies has seen growth of – what the industry likes to call – ‘added-value services’. Although, I believe that using a collective noun for such a diverse range of services is questionable – particularly if using the word ‘value’.
Convincing clients of the ‘value’ of a protection policy, be it Life, Serious/Critical Illness or Income Protection Cover, has always been a challenge. While much good work has been done to promote claims statistics and case studies, the fact remains that - in its purist form - something bad needs to happen for a customer or their family to benefit from a protection plan.
“Some may argue that being there when the worst happens is the whole point of insurance, however the large protection gap in the UK suggests that peace of mind, on its own, is not enough.”
- Nick Telfer, Protection Development Manager, VitalityLife
Value exchange
To increase uptake, I believe policies need to return value from day one and, more importantly, engage policyholders and, in doing so, improve outcomes. After all, only some customers will ever actually claim on their policy, which does little to reinforce the intangible ‘value’ they get from peace of mind.
The impact under-insurance has on the UK population is not limited to families. It also creates a burden for wider society. The already strained welfare system risks becoming the only safety net available to the under-insured.
Many of the additional services offered by insurers are still positioned near, or at, claim for ‘value’ to be delivered. As such, the ‘value’ of these, like the cover provided by the policy, only tend to offer peace of mind. Add to this the fact that they are non-contractual. How does that guarantee that any true ‘value’ will be delivered to the customer at all?
Advisers should ponder this from an advice perspective – should non-contractual benefits be used to determine a recommendation? I would also add that if customers are sufficiently concerned about being able to access healthcare when they need it, then a conversation about private medical insurance is surely worthwhile for both them and you!
Prevention is better than claim
At Vitality, we use behaviour change in a way that brings a shared-value approach to insurance – where health, wellbeing and prevention are not just offered through ancillary services but are integrated into the products. This is unlike anything else available on the protection market.
It means our members can get access to fairer pricing, enhanced benefits and improved health. It is also better for society because it enables increased productivity and reduces healthcare burden. And for us as an insurer and for you as an adviser, it delivers loyalty (and value) through better engaged customers.
A challenge which faces not just society but also insurers is the changing health of the nation. In the last 100 years, we’ve seen tremendous gains in life expectancy driven by a combination of improvements in living and hygiene standards, and more effective diagnosis and treatment of many life-threatening diseases.
Despite this fact, there has been an increase in the proportion of deaths and healthy years lost which are lifestyle related. Not far off half (43%) of the disease burden in the UK in 2019 was preventable, with 88% of these being either behavioural risks (such as physical inactivity and poor diet) or metabolic risks (such as high cholesterol or blood pressure)1. Does this sound familiar? It should do because these are precisely the risks that the government highlighted as being contributors to poor Covid outcomes.
It seems the public listened too. Public Health England’s 2021 Better Health Campaign showed that seven in 10 adults are motivated to get healthier in 2021 due to Covid-19 and eight in 10 adults have made the active decision to make changes to their lifestyle in 2021. That’s a very large potential customer base. Surely what the Vitality Programme does would resonate with them.
Behaviour change
We know that using rich and aspirational rewards is far more effective than appealing to individuals to change behaviours for health reasons alone. People need a nudge. This is why we have developed a structured incentives-based programme in order to encourage change in lifestyle behaviour.
Optimism bias articulated with phrases such as “it won’t happen to me” and “I’m perfectly healthy thank you” is a major barrier to protection sales and improving people’s health. After all, it’s much easier to do nothing.
We tackle this through the use of Vitality Age whereby customers can answer a set of questions about their health and lifestyle and are presented with their Vitality Age. This is often higher than their actual age and can be a real eye-opener. Members who complete their Vitality Age reduced the gap between their Vitality Age and actual age by 1.4 years on average2. This is over just 12 months of participating in the Vitality Programme.
Positive feedback loop
By providing rewards related to engagement such as free coffees or cinema vouchers, we motivate and incentivise members on their journey to better health. And the evidence suggests it works. Members who redeemed one of these Active Rewards reduced their Vitality Age Gap by 19% compared to those who didn’t redeem3.
And lastly, helping to monitor their activity levels is seamlessly done through the use of wearable technology, such as the Apple Watch benefit. Research from RAND Europe showed that members who take out the Apple Watch benefit are 34% more active than the average Vitality member4.
While other insurers may provide the occasional case study to support the ‘added value’ of a service, few, if any, share anything more concrete – such as engagement figures or assessment of actual ‘value’ returned.
In our most recent Claims and Benefits Report, we published evidence of value returned to members through the Vitality Programme. In 2020, throughout periods of sustained lockdown, we saw:
- 420,000 health assessments taken
- 50 million days of physical activity recorded
- 10 million cardio workouts tracked
- 790,000 mindfulness sessions logged
And in terms of rewards:
- Two million Rakuten TV codes awarded
- 500,000 healthy food orders
- 350,000 hand crafted beverages
Even in the midst of the pandemic our members enjoyed £14m in additional value in 2020, with highly engaged members benefiting from an annual saving of over £7005. Most importantly, we helped them be healthier.
We take a unique approach to protection.
Find out more.
Sources:
1. Maximising quality of life: A primer on healthspan and lifespan, Vitality Research Institute, 2021
2. Vitality analysis, 2014-2019, based on members who completed their Vitality Age in the first month of their plan, compared to the 13th month
3. Vitality analysis, 2014-2019, based on members who completed their Vitality Age in the first month of their plan, compared to the 13th month
4. Incentives and Physical Activity, RAND Corporation, 2018
5. Vitality Claims and Benefits report, 2021
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