Managing client protection expectations

man with paintbrush painting wooden house exterior

For adviser use only

 

I was out with a friend last week who was telling me about his latest home improvements. Now that we’re enjoying the finer weather, he’d decided to get the external sills of his windows painted. He phoned a few painters for quotes for giving them a fresh lick of paint, telling them how many windows he had and their sizes.

When the painter got started, he uncovered that a couple of his window sills had started to rot and would need to be replaced. This obviously meant that the price of the job was creeping up, and was going to be higher than my friend had initially expected.

This got me thinking about something that I find frustrating within the protection industry - the difficulty in managing clients’ expectations when it comes to how much protection cover costs. While protection can be a rather transactional purchase, it’s a very different purchase experience than most things we’re used to buying.

Typically, when comparing prices using comparison websites, you’re comparing standard rates across providers. However, some clients will find that after they’ve been underwritten the cost of their cover increases above their expectations.

As a result, we find at Aegon that when this happens and the price increases, only 70% of cases convert to completed policies, compared to 90% of cases which continue at standard rates. So why is this?

I think that the main reason for this will be due to the price increase after underwriting, making the cover more expensive than the client originally thought, and therefore less appealing.

But, had the client been given the increased price in the first place, would they still have perceived it to be unappealing?

I truly believe that the problem here is that as an industry we’re failing to effectively manage clients’ expectations around cost – which we know is a key factor in the buying process. Although many good advisers do try to manage their clients’ expectations by making use of providers’ pre-submission underwriting helplines, this can be a lot of additional work for them – especially if the client decides not to go ahead with the cover.

With this in mind, I’m encouraged to see the various industry initiatives that look at how we can remove this disparity. One of these ways is the introduction of partial underwriting at quote stage. Not only does this reduce customer uncertainty about how much the cover they’re applying for will cost, it provides an improved overall customer experience. 

By setting more realistic expectations at the beginning, we’ll be in a better position as an industry to deliver better customer outcomes - helping more clients protect themselves financially against life’s uncertainties. 

If only my friend had asked the painters to come round to his house to take a proper look at his windows before giving him quotes, he may have avoided the surprise increase to his painting bill!

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