Protection should offer more than just additional services near or at the point of a claim to really deliver value, writes Vitality's Nick Telfer.

The evolution of protection policies has seen the growth of – what the industry likes to call – ‘added-value services’. However, 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 purest 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.

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. An 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

A challenge that 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 Vitality would resonate with these people. Given that it incentivises healthy lifestyle choices, and integrates wellbeing and prevention into protection – rather than just through ancillary services.

A version of this article originally appeared on VitalityAdviser Insights Hub

[1] Maximising quality of life: A primer on healthspan and lifespan, Vitality Research Institute, 2021