Insurance cover for young people Getting it right...

Traditionally, insurance companies have not been successful in attracting younger people to buy their risk products. Where they have been able to attract them, it has generally been very difficult to retain them as longer term policyholders. By Nicky van

The inability of insurers to attract and retain younger consumers is the result of a fundamental flaw in respect of the design of the risk products that are made available to the segment, according to Nicky van der Nest, Divisional Director of Risk Products at Liberty. “Over the past year we have conducted significant amounts of research into the younger market segment with two main aims - understanding where traditional products are falling short and how we can deliver a product that will meet the specific needs of this market segment.”

Traditional approach outdated

The first major discovery resulting from this research was that traditional sales methods used for life insurance products are actually significant barrier to entry into this market. “The traditional recipe of selling life cover first and then later augmenting this cover to include critical illness and disability cover is simply not relevant,” explains van der Nest.

“Considering the characteristics of this younger market, it is clear that the majority have not yet reached life changing events, such as marriage or buying a property. Most also do not have children and, as such, their need is not to provide for dependents on their death, but rather to protect themselves against an inability to earn an income in future.”

One size does not fit all

The traditional risk products available reflect a “one size fits all” approach. The features of product sets are usually relevant to the needs of the entire insurance buying population, with the result that, in general, risk products are not designed to take cognisance of the needs of the younger consumer.

“Considering the purchasing patterns of younger consumers, most current products available fall short in two main ways - simplicity and flexibility. Traditional critical illness products cover a host of benefit categories using very complicated medical terminology and tests to validate claims. In addition, products simply don’t allow for an easy transfer into more comprehensive benefits over time, as circumstances change,” comments van der Nest.

Affordability

The last major finding from the research is that traditional insurance products are considered simply too expensive for this group. “Life insurance cover is not seen as a necessity and as such competes with all other potential purchases – audiovisual equipment, cars and even the entertainment budget. Considering that the main need for the group is to protect their future income, traditional income disability benefits are simply too expensive even though these are an excellent match to needs,” notes van der Nest.

A new approach

“The research shows that solutions designed specifically for the youth must be based on three main pillars: simplicity, flexibility and affordability. This includes simplified claim criteria instead of complicated medical terminology, full sum insured claim payments instead of tiering of benefit payments, and specific payment conditions, such as having a heart attack or being diagnosed with a severe cancer.”

To retain the business of the younger segment, life insurance products must also remain relevant to a policyholder’s needs over time. “This implies products that are fully flexible, allowing for changes in the level of cover over time, with minimal effort,” adds van der Nest. “In other words, policyholders should be able to convert their cover into more comprehensive types of cover as their needs change, without any need to undergo further medical underwriting or completing a declaration of health.”