By Linda Koco
Some insurance product developers are, at long last, moving toward creating full-feature contracts but with simplification.
They are a variation on the one-size-fits-all design, though, of course, they do not meet the needs, wants and budgets of all potential clients. Their simplification comes from offering design and process attributes that make the products easy to present, understand and use.
A few weeks ago, NU ran an article that spotlighted two examples–variable contracts that achieve simplicity by using no riders, streamlining underwriting, collapsing internal fees and/or making broad use of an electronic platform. There are many other strains of the same trend. In general, the simpler products are heavy on back-end management and maintenance technologies and sleek on front-end forms, underwriting and other customer-facing elements.
The trend should spell good news for marketers who have pulled their hair over insurance product complexity in the past.
It may be especially good news for advisors from wire houses, banks and other alternative financial channels who find traditional insurance products to be cumbersome at best. As NU readers know, such professionals are increasingly interested in selling insurance, but they prefer designs that are easy to present and/or more in sync with their particular discipline.
Even advisors from insurance backgrounds say they want and value product simplification, if it enhances the client-agent interchange and relationship. Being from the industry, these advisors do handle complex traditional insurance contracts with aplomb. But they welcome meaningful, effective simplification, too.
That touches on an essential point: The demand is for simplicity that meets client needs and preferences, coordinates with the advisor's systems and approaches, and does not create complexity somewhere else.
To ensure they get this, advisors should do some due diligence. Here are some questions to use in dissecting the products:
==Is this for real?
That is, is this really a simpler product than the current offerings? Put them side by side and tally up the score.
==Will the customer benefit from this particular type of simplicity?
The answer may be yes, if the client doesn't want or need to customize, and if the simplicity does not harbor inside glitches that actually impede performance or achievement of customer expectations. But the answer may be no, if the client's needs and wants demand a comprehensive approach that entails greater complexity. In short, the marketing messages in the product sales literature don't tell the whole story. Explore the impact of this simplicity on the client's overall financial plan.
