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Money Talks
Thursday, August 7, 2008
Catch 22 - service versus price
By Girlie Garduce
The debate of ‘service versus price’ in the protection realm is somewhat of a hot potato at the moment.On one hand, protection providers are at loggerheads over whether to increase the price to simplify the cover and make it easier to understand.
On the other, is raising the cost to the consumer another excuse for the general public to say thanks – but no thanks – to insuring themselves against unforeseen circumstances?So the competition of cheaper, but more complex products, against expensive but simpler, is one that seems to be a catch 22.
Cheaper seems like a headache and simpler seems to be penny pinching.
But what can be done?
First of all, rather than providers wasting time mulling over what price tag to put on its products, and whether it should be five questions or 50 at the underwriting stage, what must be measured is the consumer appetite for insurance like income protection and critical illness.
Also with the credit crunch, there needs to be some clarification about whether consumers are actually planning for the future, or just planning for what to have for dinner.
Also, when it comes to choice, there should be some measurement about whether consumers are able to make a valid ‘informed’ choice, as there is the option of just clicking on the internet and buying a protection product in a matter of seconds, with no financial advice or guidelines.In addition, if fewer questions are asked, then will this mean gaps in the information given? Or if there are more questions, is this because providers do not actually know what questions to specifically ask?
Figures taken from a protection product provider has stated that on average, six out of ten policies are sold without advice over the web. I may not be a whizz at maths, but that is a staggering 60 per cent of policies.
With the easy access to this type of technology, consumer consumption of advertisements to take out cover and the split by providers over cost and comprehension, no wonder there is panic over price increases together with the race to keep up.
Like I mentioned before - catch 22.
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One Comments
Posted by David Barnett
August 7th, 2008 @ 2:58 pm
It depends what the increase on premiums would be. If it is only going to be up to say 5% the clients are not going to notice it and acceptance will be eqasier which is good for all concerned. If the increase is going to be sighnificant, say above 10%, then perhaps both options should be open to advisewr and client, so that an informed choice and decision can be made. Sometimes to much is made of an easy solution.