How can Annual Statements be Improved: November Protection Forum Part 1

This is the first post bringing you some of the great content from our November Protection Forum. This section focused on annual statements, the benefits they offer, and how insurers can improve how they’re produced.

Poppy Achilles:

So I’m going through a process where I’ve got a new financial planner. So obviously they’re asking lots of questions and one of the things they asked was “what life cover do you have?” So having to give them access through a Letter of Authority to go off and find that information– so that’s one thing. And I guess with this open finance piece, I wonder what my experience with the financial planner would have been. So if that data is mine and I have access to it, could I have flipped a switch and made that available to them? Or do I still have to go down the Letter of Authority piece? And what does that process look like?

I guess that’s a question about how things might change in the future for me as a customer. So I’m at my 10-year Whole of Life and CIC policy review and get my statement through, and it tells me what I’m currently paying and what the benefit is. And it tells me and it asked me the question, “do you want to maintain the premium, reduce the cover or keep the cover and increase the premium?” But it didn’t set out anywhere in that document what I’d got. Yet, when I received my annual pension statement, my ISA statement, it will give me chapter and verse as to what I’m invested in, what the asset types are, what the charges are, the percentages, etc. I was just looking at those two documents in front of me.

I guess my overarching question is: why does the protection industry take a different approach to customers when it comes to providing and sharing information at those critical points? I’m just going to pose the question, and I just wonder out in the chat where I posted, whether your firms– I’m assuming they have been following the regulatory papers on open finance– how your firms have interpreted what the regulatory intent is? How do you think that might impact your firms and what you do in terms of delivering services going forward or whether you think maybe it’s too soon to think about that yet?

From our own perspective at Zurich, we do provide annual statements whether or not anything’s changed on all policies. So I think there will be differences amongst different insurers and there’ll be legitimate reasons for those differences. And we won’t be the only ones, but here are companies out there who are providing statements– and that’s not to say they’re perfect. I think we will consistently look and say, “what are the ways we can improve them?”

And in time, ideally, you might look to a stage where customers could be looking at them and potentially making changes directly or through their adviser on the back of that. So the broader piece about should we be telling customers what they’ve got, whether or not there are changes made? I think is one that I think we should.

Separately, the piece on open finance, I have been through the paper and a lot of it is about enabling the developments of change here. It’s not at the moment mandating anything. And I think they reflected there was some 130-odd responses to the original paper, most of which were different. So I don’t know that at the moment we’ve got a consensus as to what the kind of use-cases would be.

And interestingly, in the paper, they do look at general insurance areas, for example, sharing things like no-claims bonuses and more amongst different insurers. There’s no example in the paper they give that would expressly and explicitly relate to life insurance. But I think it’s up to us collectively here to reflect on where that might take us because there ought to be opportunities to improve. And I think on previous calls, we’ve talked about how Income Protection might be developed in a way that could take into account someone’s finances as informed by sharing of open finance data. So I think there are cases there.

I guess the other point worth noting from that particular paper was there are risks to it as well, so we ought not to assume that it’s all automatically a good thing. I think one of the dangers of having so much information on individuals available is that we end up diluting the impacts of the pooling of risk. So as we look at things like access to insurance, the more and more we kind of take into account, the more and more that data is shared, the more there is a risk that we end up providing cover for those who are perfectly healthy and reduce access to those who are providing more and more information on material areas where they’ve got perhaps health conditions and more that makes it harder to provide that insurance.

So we just need to be alert to the benefits of it, but I think also aware of the potential dis-benefits. You can’t put that data genie back in the bottle, but I think the FCA and others will need to be looking at a framework as to how we use it.

On the anniversary statements, so we did touch base on this last time, I did share with you what we do. And since then, I have had a couple of clients that we’ve done business with because their circumstances have changed– and if it wasn’t for the fact that we sent out our own anniversary statement, I don’t think that would have nudged them to get back in touch. There’s one in particular who has basically changed his job, had a kid, and got a mortgage. So we’re completely restructuring their cover.

I agree with what you said earlier– and I’ve got a handful on my desk at the moment– some are now electronic, some are now paper, some are good, some are bad. But there’s just a massive differential between what everybody’s [the insurers] doing at the moment. And there’s no kind of consistency, in my opinion.

Whilst I was listening, I did work out that 14% of our business this year come from us proactively sending out anniversary statements, and people getting in touch, saying, “Oh, actually, I have moved or have had a kid or I have changed jobs.” So for me, they’re super important to have those. But I don’t think the insurers are good enough providing them, in my opinion, they do need to get better.

So I have a template [for our anniversary statements], so I have a folder with all my templates in specifically for each insurer. So for example, one insurer, I won’t mention them, but I list down all the benefits that that insurer provides. Let me remind you of what this insurer provides, the benefits of whatever. And once you’ve got a template created, it’s not that difficult to just go in and put the client’s name in, attach the statement, and just tailor it slightly to their cover.

With the anniversary statement attached– only if it’s an electronic version, if, for example, it’s a paper version, then I’ll put… So most of my policies that I do are either index linking income protection or family income benefit. So when you get your anniversary statement, for you to say “right indexation is x, this was your monthly benefit, this is what it’s going up to, this was your premium, this is what it’s going up to, the before and after on both, and they get a copy of that.

And I’ve been doing that for over 10 years and I’ve never, ever, pretty sure, never had anybody cancel off the back of that. All I’ve ever had as people go, “Oh, thanks a reminder, yeah, I’ve moved house” and we set up a review. And sometimes it’s a case of, “you know what? There’s nothing you need to do, carry on as you are” or in this case, with the guy that I’m doing at the moment, we’ve got to completely restructure his cover because he’s changed three things in his life.

So for me, it’s just such an important part of the role that we do, that the insurers need to be better at, in my opinion. Everything should be electronic in these times. I won’t show you because you’ll be able to see who they are, but I’ve got a ton of anniversary statements sitting on my desk that… if they were just electronic, I could just attach the PDF and send out my thing.

And again, I know just because I’ve looked at the figures, 14% of our business this year has come off the back of me just doing that. So it’s a big thing that needs to be better, and just in regards to the open finance thing is one of the benefits I see around that is the case I had last night. She thought she had joint cover, life, CIC and IP. She thought she had the lot. She’s paying £20 a month, so I thought, “you’ve only got life” if she finally found her documents, took her ages to find the documents. But again, this is a common thing. People don’t know where the documents are. Turns out she’s got life only just for herself. But if we had that access where it gives us permission to see what they’ve got, then they can see it, we can see it.

But something on what Poppy said earlier, my concern about Letter of Authority is when we get financial advisers asking about their life insurance and then all of a sudden we’ve lost our servicing rights– that I think could help with the open finance is that if somebody gives you access to look at their protection, then you’re not going to lose that kind of authority on that account as the adviser… Does that make sense?

Many of the points dovetailing with what Adam was saying, to be honest, the one frustrating bit is that there isn’t just– I can see probably four or five different insurers represented, probably more actually, on the participants list there– but it’s a shame that there is no uniform statement that they all fall into line of the same thing.

So they all have to send out their key facts. So they all have to send out their policy conditions or whatever it is. If it was just mandated that you had the annual statement, which is all sent in the same format and all insurers fall into line with that… From a consumer perspective, it just makes things so, so much easier. And whether that is a lobbying thing that we have to try and pull all of the insurers and say, “Come on, guys, let’s just get a bit of uniformity on this” because it benefits everyone. There’s no negative in it. I know there’s the old stigma of, “well, if we tell them what they’ve got, they might shop around and cancel.” Well, you should have done your job properly in the first place, dare I say it? But I don’t see any real negative in making customers aware of what they have.

And the other consideration, which again, Adam touched on it is the method as to how it is sent. So for consumers, and again, different insurers have different facilities on this. But the whole paper based statement, it’s a bit old school now, if we’re honest. So in this day and age, can we have it electronic? Can we even, dare I say it, have it in an app for customers where they can actually just log into their Guardian/Zurich/Exeter/other insurers are available app that can be looked at, that they can see it in real time at any point if they wish to. And if they want to then share that with an adviser, then fine. But at least they’ve got the information readily available.

My wife is an amazing person, but if I asked her who our mortgages with, she wouldn’t have a clue. But if she went to an app that she’s got on her phone, then she’d be able to see who it’s with or look in a certain place where I’ve made it nice and easily accessible for her, then she would see who it is. But lots of these things is just having that information to hand that customers can access it easily– if it’s on a bit of paper squirrelled away in the back of the drawer somewhere, who’s going to find that?