Should we have simpler products?

Part of the discussion with consumer groups, FMA, Providers, Government; Are our products too complex?

Monday, May 2nd 2022, 9:27AM

by Jon-Paul Hale

Complex? Yes. Too complex? Not so sure.

We all have stories where clients with 'essential' or bank products have been left short on their expectations. And simpler products run this risk.

Disability is one of our most complex products, but we have significant shortcomings or substantial increases in premiums to simplify it.

Simple products = less cover or increased costs.

So no, I don't think we need simpler products.

We could reduce options not used or so often used by being baked in rather than more tick boxes.

However, this raises significant issues for insurers, specifically passback options. Many options have increased premiums; they can't be baked in.

Passback is somewhat limiting to product simplification. A new product range breaks passback but opens the door to streamlining products.

So as an industry, we have a complexity that has ramifications, and it is not a simple answer with unintended consequences.

One approach for insurers is to bake in options but defer passback specifically in policy wordings; what's included vs increased premiums.

One thing that would help is better version control on the product info. It has improved with most, but there's still room for improvement.

Partners Life's rebrand is a recent example of how not to do this. They reset their marketing collateral version control back to version 1 in several places. Their application form is the current obvious one where it was version 22 and it is now back to 21.

Asteron Life updated its application form last year and added many things, expanding and clarifying ownership much better, being one of them. But the comms on document change were not as good.

Yes, this stuff on updates and version control is one of my pet hates about the industry. All companies need to do better in keeping advisers informed of changes and provide documentation on what has changed when. It's a bloody nightmare to keep track of!

But I digress; when we look at simplification, we end up with product features being removed. It often leads us to a situation like the UK with regulated definitions of trauma policies.

This removes innovation and focuses insurers on underwriting and claims areas where the price is the only difference consumers perceive. This leads to undesirable distortions where cover can't be placed with tough underwriting, or the claim is a nightmare.

None of these extremes are what we desire for consumers.

* Cheap products that don't work
* Cheap products that you can't get
* Expensive products that work but are difficult to get

Affordable products, reasonable to underwrite, and fair at claim time is the balance we need to aspire to.

Many of our products achieve this right now.

People talk about life cover being complex.

Not sure how you simplify; you die, the death certificate matches the policy, and the policy pays.

Sure, if you talk about underwriting and premium structures, they get complicated; the product is already pretty simple.

We look at the other products; the complexity increases quickly.

Partners Life's foray into the trauma space is an example of this. Do we really need a layered approach? Or is this just a ploy to gain more shelf space?

Aka, the Nerurofen marketing 'scandal' releasing "different" versions of the same pain med to gain more space on the retail shelf.

We need innovation in all products, but do we need more product lines?

Maybe, innovation with good ideas might find something worth rolling out. Mental health and aged care are two core issues facing our communities but haven't been cracked yet. Mainly due to costs vs recoverable premiums. Someone may have a bright idea.

I'm an adviser, not a product manager, so none of this is likely to provide answers. As advisers, we need to be talking to our product providers about what our clients need.

Under the new regime, product providers make products, we advise on these products for our clients. Our role doesn't end with just providing advice.

We are also part of this industry, and we need to tell providers what we experience; it's how product development moves forward.

Tags: FMA