The Association of International Life Offices (AILO) has taken a ‘deep dive’ into regular premium products with its new Regular Premium Product Survey Report.
In a statement on 6 September AILO said that regular premium products are firmly embedded in the DNA of the cross-border life sector.
Back in the day, this was the ‘Origin of Species’ product structure that met the needs of foreign nationals working abroad, long before single premium products became a major feature of this market.
More than 40 years on, times, tastes and certainly regulatory attitudes have changed, so that regular premium products, whilst still the main source of business for some AILO Members, no longer dominate the sale of cross-border life products in the way they once did.
This recent survey by AILO conducted with its members aimed to identify why this is the case and what, if anything, can be done to address the relative decline of this form of business.
The survey results confirmed much of the current thinking on this issue:
• The AILO membership contains a great deal more ‘Experience’ of regular premium products compared to those businesses and individuals who are currently ‘Active’ in promoting them.
• The main reasons given for this were ‘greater point-of-sale cost transparency’ and ‘restrictions on initial commission payments’.
• 77% of respondents believe that this pattern of decline can be reversed, but there was a lack of consensus regarding how this can be achieved.
• Survey participants believe that delivering better customer value for money should be the main focus of future regular premium propositions.
The survey also highlighted that cross-border regular premium products are not a homogeneous group, rather they split into four segments:
• Group Savings products continue to form a lucrative if niche segment of this market, targeting multinational and regional companies with employee benefits solutions. This remains perhaps the most persistent and stable form of business in this sector.
• Group Protection, working hand in had with Group Savings solutions, is another niche and highly competitive segment providing profitable opportunities for a small number of specialist providers.
• Individual Protection products have seen the biggest decline in activity, but this is in part linked to the decline in Individual Savings Plans as both product groups seek to target a similar younger customer demographic.
• Individual Savings Plans not only continue to be the most active product group, but they also dominate the culture surrounding this product set, and are the main focus of the feedback, written and verbal, in this survey.
The survey report concludes that if the relative decline in regular premium business is to be addressed, the Individual Savings Plan is where the effort needs to be focused.
Consolidating the survey inputs and follow-up discussions with participants, the report goes on analyse the three stakeholders to Individual Savings Plans (customer, distributor and product provider), in order to identify the principal objectives of each and to assess these against the three generic remuneration models operating in this market.
Based on the survey responses and subsequent discussions, plus the stakeholder analysis, the report ends by proposing a Future Individual Savings Plan proposition that aims to create a more equitable share of the product’s economic value, one that’s better aligned with delivering better value for money for customers that’s consistent with current regulatory trends, as well as targeting a younger demographic.
AILO CEO Bob Pain said: “For those of us who’ve been around this sector for a long time, the promotion of regular premium products is an activity many of us are familiar with, but one that has become a less evident feature for many in recent years.
“What is most encouraging about this survey is that this knowledge and expertise within the sector hasn’t gone away and is capable of being collectively harnessed via AILO to help develop the potential product solutions of the future”.
The Regular Premium Product Survey Report is available exclusively to AILO Members on request to the [email protected]
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