Direct insurance improving, says insurance specialist

Speaking to Risk Adviser, Sequential partner for claims and underwriting, Ruth Keaney, said that while direct insurers have been a “problem child” in the past, they are starting to be a threat to advisers.

“Advice businesses have preyed on the fact that the direct businesses are an inferior product but we are starting to see better products coming through and more choice,” Ms Keaney said.

Direct insurers are also placing a greater focus on what the client wants, and products are being enhanced to meet those wants, she said.

Ms Keaney added that the direct space is also winning over younger generations who prefer to interact and make transactions online.

“There is a lot more choice for customers, and with the products improving, [the direct space] is certainly a contender,” she said.

According to Ms Keaney, direct insurers are starting to “catch up" to general insurers by using similar processes as the ones the general insurers do, such as predictive customer modelling.

“[This includes] modern underwriting lifestyle factors – that is, better ways to measure and reward positive health and wellbeing steps customers are taking. [For example,] reducing weight and active gym memberships,” she said.

“All of these are both a threat and an opportunity to advice businesses as insurers look to move to more personalised sustainable and modern pricing and forging a greater connection and trust with their customer.”

Ms Keaney said advisers should consider working more closely with insurers to capitalise on the innovations and developments they are making, including getting life offices to complete activities such as the underwriting process.

"The alternative is the direct market will disrupt the retail adviser market and insurers will replace the adviser and open to pure direct business," she said.

According to Rice Warner head of consulting and research Jenni Baxter, the direct market has a key advantage over both the retail and group insurance sectors since it has greater agility and speed when it comes to change.

"It continually tests and re-tests distribution models. With the right focus and technology spend, direct retains the potential to perform well," Ms Baxter said.

"Some further positives for the direct [sector include] the 2014-15 year may prove to be the seed for market share growth, with the retail insurance industry likely to have a challenging 2016 if insurers decide to focus more on direct distribution models in reaction to potential impacts from the Trowbridge Report now known as the Life Insurance Framework."

Ms Baxter's comments follow the release of Rice Warner's recent Direct Insurance Report 2015.