‘How can we get more people to buy Life Insurance?’ This is an important question, but how does the answer depend on what we know about consumer knowledge and how we use it? And how does confidence come into the equation? These are issues we addressed recently when we kicked off a study into consumer knowledge and confidence when buying financial products without the help of an Adviser.

Consumers need new options other than face to face

There is a strong need for the industry to help more consumers buy Life Insurance with other options to the traditional face to face advice meeting. This isn’t advocating a move to non-advice for all protection business, but recognises the realities consumers face in seeking advice and the industry pressures faced in the provision of advisory services.

As we know, post RDR some consumers have resisted, or been put off by fees. However, on the supply side of the equation, the issue is more that firms have concentrated commercially on the mid to higher end of the market, so not actively seeking out the ‘mass market consumer’. Protection is a vital part of a fee-based financial planning discussion, even though some advisers may still be taking commission for the protection element. The fee could be a barrier for some consumers to even speak to an adviser, not knowing that for a protection only need, they may not end up paying directly out of their own pocket. For many investment-focussed advisers, the time and cost of protection administration and underwriting is considered a hassle, so this deters them from advising on protection business.

The other challenge for many advisers has been coping with the impact of the MMR. The mortgage advice process has been extended considerably and often the protection discussion suffers. This has been particularly noticeable in telephone based mortgage sales from the banks, where after 3 hours on the phone, the weary adviser asks the weary customer to start thinking about their protection needs. It’s no surprise consumers lose the appetite to continue, resulting in many unprotected mortgages.

Our research was driven by the desire to better understand what remote, reduced or non-advised processes would need to look like to help consumers have greater access to protection. We also looked at a wide range of other products. Our hypothesis was that, if we knew what consumers think they know and then benchmark it against their actual knowledge, then we can help design more relevant user journeys, content and engagement tools for consumers not accessing traditional face to face advice propositions. We also needed to better understand how confidence levels and knowledge levels work together. If a consumer knows a lot about Life Insurance are they equally confident to buy without advice? Will all tools we introduce work equally well for all consumers? What behavioural science techniques will be required in the design of new customer experiences?

Customer Knowledge of financial products

In the study in conjunction with research and insight specialists Opinium, we asked 2000 nationally representative adults to identify their understanding of Life, Critical Illness and Income Protection against one of 4 descriptions. We did this for each product. The descriptions were designed to help consumers to be more considered in their own assessments, for example; ‘I fully understand the way these products work and why I need them’ to ‘I have no understanding of how these products work and why I need them’, with shades in between.

For Life Insurance the results showed high levels of self-perceived understanding, which as for most other products tends to increase by age.

 

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The research then looked at actual knowledge, by testing basic understanding of the operation of Life Insurance against 4 descriptions of what the product would provide for the respondent.

The actual number who were correct was %*. This compared to 76% who thought they understood the product a substantial difference of 65 percentage points.

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If we look at the data by household income then there is no statistically relevant difference, nor is there when the data is cut by age. The slight increase in actual knowledge probably reflects the greater incidence of purchase by the 35 to 54 age group.

 

 

 

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These results give rise to a number of observations. Firstly, consumer knowledge [albeit flawed and over exaggerated] is probably not a key reason for a lack of engagement with Life Insurance. Had self-perceived knowledge been closer to the real and much lower tested knowledge levels, then we’d probably conclude the need to increase knowledge as one way to increase engagement. However, a big but is when we look at the real knowledge levels in the study. These are significantly lower than self-perceived levels and suggest there are potentially a lot of consumers unaware of their misunderstanding of important aspects of their purchases. So, perhaps improving knowledge should be driven by the real need to avoid miss-buying, not necessarily to raise engagement?

Looking at consumer confidence levels to buy without the help of a financial adviser may help us shed more light on this engagement issue.

For every product in the study we asked consumers to rate their level of confidence to buy without advice. Again, using a 5-point descriptive scale ranging from; ‘I have purchased or would purchase online without professional financial advice because I am very confident to do so’, to ‘I have never or would never consider buying online and would just seek professional financial advice to make my purchase decision’.

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Consumers’ confidence to buy Life Insurance without advice only increases very slightly with age. There is a more marked difference when you factor in levels of household income. Those on lowest incomes show much less confidence than those earning mid and higher incomes. Those who purchased via an IFA, as you would expect, show a lower level of confidence than respondents who purchase directly.

Overall a comparison of self-rated knowledge vs confidence to buy without advice shows the latter to be noticeably lower. This phenomenon is consistent across every product tested in the study.

How to improve confidence?

What can we do online and offline to improve consumer confidence to purchase without an adviser, and what would be the real value of these ideas? This next chart summarises a range of tactics to improve confidence.

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Each tactic was rated against a scale of helpfulness to improve confidence to buy without the aid of an adviser. What’s interesting is how these different tactics can appeal to different age groups, for example an interactive game would be 3 times more likely to be helpful to someone under 35 years of age compared to someone over 55. This reinforces our view that a more segmented user experience and journey will help improve engagement levels, as consumers will gain more or less comfort from different tools and initiatives.

Another interesting observation from the research is the point of purchase app which helps the user self-validate their understanding of their purchase. This was the joint most helpful tool across the whole sample. It was by far the most helpful tool for the under 35’s – the very segment which most obviously over estimates their knowledge levels. Key reasons for being rated so highly included; ‘It would explain areas of the product I may misunderstand or not understand fully’ – . ‘It would give me the confidence I am making the right decisions’ – 45% of respondents. This tool has been in live use for 2 years with a major bank for business protection cover and has delivered valuable insight and improved customer outcomes.

Robo Advice – it is worth the hype? Will it work for Protection?

When we kicked off the research, it was in part motivated by the challenge, ‘how to fill the advice gap?’ In particular, we considered the growing noise around Robo-Advice. The study tested Robo-Advice as an initiative and the results are not conclusive.

This chart shows the overall awareness of Robo-Advice vs those who understand the term [all respondents who choose the correct definition of the term]. It also shows how this cuts by age, household income and channel used previously to buy.

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Whilst % of the UK population claim to have heard of Robo-Advice, of these only 5% actually understood what it is. The over 55’s were noticeably less able to define Robo-Advice accurately. Awareness seems to be higher amongst higher income earners and those who have used IFA channels. This suggests the mass market might be harder to crack. This is supported by our analysis of the likelihood to use Robo- Advice for a wide range of products, for example for Life, Critical Illness and Income protection less than 20% say they will use it.

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New thinking required

There is a lot more insight to be mined from our study and this work will continue. For those responsible for products and propositions, user journeys and customer experiences there are some valuable points to be considered.

To encourage consumers to buy more Life Insurance [or any of the other protection products for that matter], requires a strong and engaging proposition which leads them to the need for the product not leads with the product. We suspect this will require different engagement and communication techniques, as the majority of people are not searching for protection cover.

There is also a strong need to simplify products to take away the complexities which put off people from buying. This includes stripping out traditional wordings and practises which engender a lack of trust, shortening the buying process and making protection available on mobile devices.

Customer experiences must engender confidence so that users feel they will be supported in making the best decisions. This requires behavioural decision support tools such as those tested in the research.

Lastly, the research strongly suggests more segmentation of user experiences, content and journeys to better reflect the different attitudes and mindsets of users. For example, different tactics for different age groups rather one customer experience for all. Coming back to the original challenge, we consider what consumers think they know about Life Insurance is the real issue, as is the need to improve decision making support and consumer confidence where advice is not part of the equation.