Blog: The complexity of simple products (Article by Owain Thomas in on 15.02.2012)

15 Feb

Phil Jeynes warns that removing components from simple products may mean weaker cover for clients.

Nobody so far has been able to explain to me exactly what they mean by a “simple product” in the context of protection.

Whenever I’m asked if I think simple products are a good idea, I say “yes”, but I contend that the products we have at present are simple enough.

How much more simplistic than life insurance can you get?

The fixation seems to be around the complexity underlying some protection products – serious illness cover, for example covers 161 conditions and critical illness contracts offer protection for dozens of diseases; surely this means they are too difficult for Joe Public to understand?

While stripping elements from products will undoubtedly make them easier to grasp and might result in a lower premium (although how much lower is a separate debate), it is not really what the industry needs.

Take cars as an analogy; I want to get the most value for my money and if that means the manufacturer using technological advancements and smarter designs to keep prices low then great.

What I do not want is for the seatbelts and airbags to be removed and the brakes compromised in order to make the product “simple”.

Removing component parts of a protection policy will result in weaker cover for the client.

The reason some elements of our plans are complex is that the issues they aim to protect against are equally multi-faceted; cancer is not a simple disease, it ranges vastly in its severity, aggressiveness and in the likely outcomes for the sufferer.

Our products need to be designed to deal with this complexity – not to shy away from it for fear of being confusing.

It is certainly true that customers can be bamboozled at point of purchase but this is not a problem unique to protection, virtually every purchase one makes can be confusing without appropriate guidance – be that online, in store or independently.

I remain convinced that intermediaries are the key to decent, appropriate protection sales.

Giving them the training, sales and marketing support to distribute our products is far more important than designing inadequate, cut price contracts in the hope that simplicity equals sales.

PPI serves as a lesson that this thinking is not always sensible.

In any case, the simplest products do not always become the best sellers; by far the most basic protection product is whole of life cover and this represents a small proportion of annual sales.

That our policyholders understand their cover is crucial, that they are conversant with every facet at point of sale is not.

To return to my earlier analogy I do not need to know how leverage, friction and hydraulics combine to make the brakes of my car work, I just need to know that they will stop me when I push the pedal.

Phil Jeynes is head of account development at PruProtect.

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