On September 24, Montoux partnered with PwC UK on a webinar entitled ‘Product design and pricing of Income Protection - What the UK can learn from the Australian crisis.’ The webinar addressed the growth of the IP market in the UK, the challenges facing the more mature IP market in Australia, and opportunities for UK insurers to learn from their Australian counterparts’ experience.
- Shelley Cox, Chief Customer Officer at Montoux
- Matt Ralph, AUNZ Director of Customer Success at Montoux
- Phillipe Guijarro, Partner at PwC UK
- Ewen Tweedie, Manager at PwC UK
The UK Income Protection market is experiencing rapid growth right now as insurers expand their product offerings in response to increased consumer demand. Across the pond in Australia, where the IP market has been around for some time, insurers are grappling with IP product design and pricing challenges in response to recent interventions from the regulatory authority APRA. Montoux’s Matt Ralph, an industry expert with significant experience in the Australian market, discussed the IP situation in Australia with UK market experts from PwC UK and Montoux to isolate specific opportunities UK insurers have to learn from the Australian IP market.
Key Insights from the webinar included:
- The UK IP market has been experiencing sustained growth in income protection sales over a period of time now. Key drivers include increasing concern over financial resiliency (increased gig-work, increased financial commitments like renting), increasing uncertainty around circumstances like Brexit or COVID-19, and more affordable, innovative products sold in the market in efficient ways.
- The Australian IP market experienced two waves of growth, one 30 years ago and another around 20 years ago that died down roughly 6 years ago. Currently, it’s about a quarter of the overall market.
- The key challenge and opportunity with product and pricing with IP products is making products that customers value and understand and are simple. High customer awareness, particularly amongst new customers, helps make this possible.
- It’s vital UK carriers leverage new technologies when developing new IP products. It’s also important they monitor new market developments, like increasing awareness of the impact of mental health, when considering new approaches to product features and pricing.
- One key challenge the Australian IP market faces is that the IP products available are built on old, inflexible systems, which makes them more complicated. This problem was exaggerated by advisors’ push to add as many features as possible.
- Poor IP product design in Australia has contributed to a spiral of losses that culminated in a loss of $1.2b in 2020 alone. This has led to the regulatory authority becoming much more involved in the market.
- A key question that was posed was: how can insurers continue to grow their new business without getting caught up in a features arms race? Insights pointed to relying on improved data analytics to better understand customer behavior and priorities when considering new features.
- Building trust between insurers and their IP customers will go a long way towards smoothing the claims experience, improving product design, and better understanding what customers expect and need from IP products.
- Fintech and insurtech don’t have a significant role in IP sales yet, but their involvement and influence is growing at a steady pace.