Customer behaviour has changed how do you continue to win and retain their loyalty?

Transcription

1 The FirstAssist Update February 2013 Market and sector news Customer behaviour has changed how do you continue to win and retain their loyalty? insurance services

2 Welcome to our first bulletin of 2013 One of the major consequences of austerity is that many consumers change their traditional brand and purchase preferences. As a result, today s customers are more promiscuous, value-focused and unpredictable in their spending patterns. Whilst this shift in behaviour has not necessarily led to reduced loyalty across the board, it does mean that brands, particularly in the mass market, have to fight much harder than ever before to retain their customers loyalty. Last October, the Office for National Statistics (ONS) reported that national income per head, after taking inflation into account, had fallen by more than 13% since the beginning of 2008¹. Austerity is set to continue in Britain until at least 2018, with further tax rises and public spending affecting many UK consumers. Along with inflationary pressures, worries about the state of the economy and the Eurozone, it s not surprising to see many consumers still being forced into making difficult decisions about where they spend their reducing levels of discretionary income. One of the key challenges in this environment is: how best to retain and deepen customer loyalty and so continue to grow your business, at a time when many people are feeling financially squeezed? This edition of the Bulletin looks at some of the areas where partners have an opportunity to increase customer multi-product holding, as well as some of the challenges and issues in our key markets. We believe the major changes taking place within the NHS for example, are driving the need to alleviate consumers ever growing worries and protect their lifestyle aspirations with new and innovative supplementary gap-filling products and services. As always, we are working with our partners to ensure they are best placed to take advantage of the ever changing landscape, even in these times of prolonged economic austerity. In particular, this year our innovation programme will seek to broaden our range of market-leading health, life, accident, protection and travel insurance propositions to satisfy your customers ever changing needs. So, it is with great excitement that we look forward to working with you this year to help you deepen your customer relationships and brand loyalty. Best regards, Alistair Hardie Chief Executive, Global Individual, Health, Life & Accident, Europe Chief Executive, FirstAssist Insurance Services Ltd 1 BBC Business News, 18th December 2012 FirstAssist Update - February 2013

3 Contents Meeting emerging customer needs to supplement NHS provision 2013 is a critical year for the NHS, as front-line services come under intense pressure. We look at some of the opportunities to deepen relationships with products and services which supplement NHS provision. Re-engineering insurance add-ons and packaged benefits to appeal to today s customers With many insurance add-ons coming under pressure, we look at how propositions are evolving to deliver greater customer value and encourage more loyalty. Helping customers protect their lifestyles in these challenging times Further changes to the benefits system and ever increasing levels of consumer debt are driving the need for financial protection. We look at some of the different ways to deliver customers the support they need. Retaining customer loyalty in an uncertain travel market Ever changing travel patterns are having a profound impact on consumer behaviour. We look at what is needed for partners to retain the loyalty of their customers. Page 4 Page 12 Page 18 Page 25 3

4 Meeting emerging customer needs to supplement NHS provision 2013 is a critical year for the NHS as it seeks to introduce the Health and Social Care Act at the same time as finding the difficult cost savings needed to deliver the required 20bn in efficiency savings. There is mounting evidence that more and more front-line care services and treatments are being restricted and cutback. More and more consumers realise the scale of the problem and accept some services are having to be cut, but are also increasingly worried about the impact this is having on key areas such as diagnostics, aftercare and rehabilitation. The openings to supplement NHS provision with new propositions are emerging fast and there is an immediate opportunity for the first movers to unlock a very sizeable mass market opportunity The openings to supplement NHS provision with new propositions are emerging fast and there is an immediate opportunity for the first movers to unlock a very sizeable mass market opportunity. FirstAssist is rising to the challenge with a concerted programme of innovation, underpinned with consumer research that we have commissioned, to help equip our partners with the products and services their customers want and to help them win greater levels of loyalty. 4 FirstAssist Update - February 2013

5 2013 is a critical year for the NHS The NHS is arguably facing its greatest ever challenge since it was formed in If 2012 was a pivotal year for the NHS, then 2013 is an absolutely critical one. This is the year when all eyes are on the NHS. That s because it not only has to try and safely navigate its way through the Health and Social Care Act which goes live this April, but also has to find more of the 20bn of savings required by 2015 through becoming more efficient; both without impacting front-line care. It s a tall order and the scale of challenge was summed-up by Sir David Nicholson, Chief Executive of the NHS, in a recent interview with the BBC 1, in which he said the NHS is on high alert in relation to the potential for quality problems as we go through the transition. His comments came as the King s Fund warned that care could get worse over the coming years and that this year could be the turning point 1. This was backed-up by comments by Margaret Hodge, chair of the Public Accounts Committee, who claimed that the low hanging fruit the easiest savings have already been harvested 2. It s very clear that the push to make savings is almost certain to get harder. While much of the immediate focus has been on the Government reforms and spending cuts, there are even more significant long-term problems that also need to be addressed, such as: l The impact of an ageing population l Paying for the rapidly increasing costs of medical advances l Tackling the big three lifestyle factors obesity, drinking and smoking Care could get worse over the coming years All of this will continue to increase demand and costs for healthcare, at a time when NHS budgets are almost certainly going to be tightly squeezed due to flat economic growth and the need to rebuild public finances. 5

6 The influential think-tank, the Nuffield Trust, has stated that even if the health service manages to achieve the 20 billion of savings, there will still be a 28 billion hole in its finances by 2021/22 3. They went on to warn that a cash-strapped NHS will have no choice but to restrict services and limit care, forcing it into effectively becoming a two-tier service by stealth. Front-line services are being affected From the consumers point of view, much of this seems invisible. But there are growing consumer fears and an ever growing stream of hard evidence which proves that front-line services are being affected, despite pressure from the Government to the contrary. For example, a recent National Audit Office (NAO) paper noted that patients are being affected by the cuts 4. Over 50% of the Trusts surveyed reported tighter limits on some people who could access services, with restrictions for smokers and obese patients plus longer waiting times for non-urgent treatments, such as cataracts. This comes at a time when access to hearing services are being limited and more restrictions are being placed on hip and knee operations and eye surgery. Just recently, it was reported by The Guardian that GPs in South London had been asked to reduce, or axe, services in a bid to make 2.32 million of savings, with physiotherapy and osteopathy also under threat. This all shows the extent to which frontline care and services are being affected. There are growing consumer fears The number of NHS patients waiting longer than 18 weeks to be seen at a hospital also increased for the first time in the year to June , providing further evidence that cuts are hitting front-line services. 6 FirstAssist Update - February 2013

7 Consumers treasure the NHS, but are becoming more concerned An Ipsos MORI poll carried out last year reiterated the public s view that the NHS is the number one area the public want to be protected from the cuts 3. We are also seeing from research we are carrying out with YouGov the extent to which the public are proud and protective of the NHS. This also reinforces the public s view that the NHS provides high quality treatment and can be relied upon to deliver when matters are serious. But it s also revealing the extent of people s growing anxieties particularly around initial medical diagnosis, aftercare and rehabilitation services all of which are vitally important aspects in maintaining peoples health and lifestyles. A BBC poll carried out in September 2012 revealed that there is a wider and growing acceptance that services do have to be cut. In it, 61% agreed that the NHS would have to stop providing some treatments and services in the future due to rising costs and increasing demands 1. As the media spotlight turns towards the NHS in its absolutely critical year, we would expect to see more stories about cutbacks, rationing and waiting times. Public awareness and levels of concerns will almost certainly grow as the media coverage increases. To what extent will consumer loyalty to the NHS be examined by these changes? There is no question that the NHS will always be there to look after life threatening conditions, but what about non-life threatening conditions, many of which are lifestyle threatening, such as hip and knee replacements and cataracts? Many of these are being increasingly limited. And what about key areas such as diagnosis, aftercare, rehabilitation and physiotherapy? We know from our own consumer research that above all else, people want to maintain their lifestyles so anything that impacts this is a key issue. We also know that the over 50s and those with families in particular feel the burden and are most concerned about change. The burning question is: at what point will consumers accept they need to act and want to take more control over their healthcare provision? 7

8 The time to act is now We believe the main opportunity to extend the range of products and services offered is in the mass market which amounts to around 40 million people in total. As this is also the population segment feeling most squeezed by tax rises, welfare reforms and inflation, it means that for many people in this segment comprehensive Private Medical Insurance (PMI) will simply not be a viable affordable option. We know that to unlock this sector, products and services not only need to address core customer concerns and worries, but must also be simple, affordable and accessible. So, the answer for many customers will be low-cost supplementary products and services, designed to complement NHS provision and gap-fill areas of need, particularly around key areas of initial diagnosis, aftercare and rehabilitation. An excellent opportunity to deepen customer relationships and brand loyalty The changing environment presents many brands and affinity partners with an immediate and rapidly growing opportunity to meet their customers increasing needs to gap fill areas of NHS provision. In doing so, it provides an excellent opportunity to deepen customer relationships and brand loyalty with complementary propositions. The early movers will be in the best position as the mounting pressure on the NHS increasingly impacts on frontline services, so for those partners who are prepared to act now, it is likely to pay off. 8 FirstAssist Update - February 2013

9 Spotlight on: Priority Diagnostics Plan FirstAssist Insurance Services has launched Priority Diagnostics Plan, extending its suite of health, life and accident products for partners. Why launch it? With mounting concern about increasing NHS waiting times, the plan equips customers with the means to be more in control of their healthcare. It allows customers to gain quick peace of mind through a quicker diagnosis of any medical problems by offering them a key element of private medical cover, helping to avoid the anxious wait they might have with the NHS. What does it do? It helps customers get their health problems identified quickly and privately. With access to the latest medical diagnostic tests and scans, it empowers customers to obtain immediate access to a specialist medical consultant of their choice, in the hospital of their choice. It gets their problems diagnosed quickly, giving customers peace of mind that they know what s wrong. Priority Diagnostic Plan starts from just 15 per month. 9

10 Spotlight on: Personal Surgery Plan Last year, FirstAssist Insurance Services launched Personal Surgery Plan. Why launch it? To provide a straightforward and affordable way of providing financial support for customers as they recover from any type of operation. What does it do? It pays cash benefits depending on the severity of the operation and typical recovery period, in the event of any type of in-patient or daypatient surgery, with a maximum benefit of 10,000 for the most complex procedures. Customers are free to use the cash at their discretion. For example, to help towards their bills or to provide assistance towards the cost of recovery procedures such as physiotherapy, giving them the option to go private. The product offers simplified acceptance meaning that it s quick to setup with no medical questionnaire required. FirstAssist has already experienced strong take-up, particularly amongst existing Personal Accident customers who recognise the value of this type of product. Premiums start from only 7 a month. 10 FirstAssist Update - February 2013

11 FirstAssist is equipping its partners to succeed in this space As a customer-centric organisation, we re continuing to innovate with an exciting range of new health and accident products, helping partners extend their customer propositions, deliver increased value to them and in the process, win greater loyalty. We ve already launched Priority Diagnostics Plan and Personal Surgery Plan and will continue with our research into consumer worries and concerns, to identify new ways in which we can help our partners address key customer priorities as the NHS continues to retrench by restricting, rationing and limiting front-line services. We re confident that the solutions we re bringing to market will help our partners unlock opportunities to better serve their customer s changing needs and meet the growing demand for supplementary health and accident products, in what is a very attractive market opportunity. 1 BBC Health News, 27th September The Telegraph, 13th December The Guardian, 3rd December BBC Health News, 13th December The Telegraph, 17th August 2012 To find out more, please contact Jody Baker, Head of Business Development at jody.baker@firstassistinsurance.co.uk or on

12 Re-engineering insurance add-ons and packaged benefits to appeal to today s customers The spotlight is once again on insurance add-ons with the FSA review this year following the review into Packaged Current Accounts in The key theme is that insurance add-ons must provide the benefits that customers need and want, with the onus on eligibility, suitability and transparency. This is likely to lead to a fundamental re-engineering of product design and processes with the aim being to deliver benefits that provide greater customer value. Innovative new products are being launched which offer a more refined and highly segmented approach, based on lifestyles and we would expect to see more of this as providers strive to deliver greater value. FirstAssist already has an established track-record and strong reputation in providing attractive insurance add-ons to bank accounts, cards and core insurance products. We are building on this pedigree with new products based on meeting proven customer needs. 12 FirstAssist Update - February 2013

13 The spotlight is on insurance add-ons Many organisations deploy benefits-led strategies as a means of winning greater loyalty by providing customers with a convenient package of appropriate benefits, as well as providing them with a platform for up-selling higher levels of cover. This year the spotlight is very much on insurance add-ons and Packaged Current Accounts. According to figures published by the FSA in October 2011, there are around 10 million people in the UK with a packaged bank account. The regulator believes there is a place in the market for these types of accounts, stating that some consumers can get value from the way they are packaged, depending on the features they use. The changes introduced in 2012 puts the onus on firms selling packaged bank accounts to adhere to new rules around eligibility, suitability and transparency, at point-of-sale and subsequently with the need to provide customers with annual eligibility statements. The emphasis is on better informing customers so that they know what they are buying and helping them understand the limitations around cover. The FSA investigation into insurance add-ons this year is likely to focus primarily on high-margin, low-cost products, amidst concerns it has that some of these products might be of little use to customers 1. For motor insurers, this comes on top of the Competition Commission market investigation and the ban on referral fees, which comes into force from April 2013, all adding to the mounting pressure on ancillary revenues. So, what are we learning about product design for brands and partners that deploy insurance add-ons as part of their benefitsled strategies? Insurance add-ons must provide the benefits customers need and want 13

14 Providers are re-engineering products to better cater for customer needs The gauntlet has been well and truly laid down to ensure that the add-on insurance benefits offered to customers are those that they are proven, from research, to want, are eligible for and which above all else deliver broad customer value. This has to be defined as being the products and services that customers actually use and properly benefit from. However, one of the key challenges is in making this approach work commercially from a pricing perspective. This is due to expected higher utility levels and claims volumes, arising from the fact that these products and services are more likely to be used. The pressure is very much on to deliver better customer value and is driving a fundamental rethink of product design; which continues to be at the heart of the customer proposition. Add-ons are being increasingly assessed against their ability to deliver useful benefits Eligibility, suitability and disclosure are not the only watchwords anymore. It s now also about offering greater choice and flexibility and equipping customers with the tools and information they need to make well informed purchase decisions around the products they buy. What is abundantly clear is that add-ons are being increasingly assessed against their ability to deliver useful benefits, meet higher levels of customer need and ultimately to enhance customer value. This puts enormous pressure on products such as card protection, key insurance, mobile phone cover, identity theft and extended warranties. 14 FirstAssist Update - February 2013

15 Figure 1: Critical design features for insurance add-ons Easy for all parties to understand Product longevity Robust compliant processes Critical Design Features No barriers to claim Quick and easy to sell Value for money with high usage rates Drives higher levels of trust, a greater propensity to buy and greater retention levels With product development evolving quickly, we believe the emphasis will shift to pursuing one or more of the following approaches: l Stripping out complexity we would expect to see more providers reign back the number of products offered and simplify sales processes to make products easier to understand for customers and staff alike l Replacing or enhancing propositions to take advantage of emerging opportunities for example in low-cost healthcare, as a key growth area with the NHS cutting back and restricting services l Moving to a much more segmented approach with increased tailoring and packaging of benefits for example into different packs to appeal to specific groups of customers, lifestyles, needs and budgets l Developing new ways of thinking around the product and service delivery such as flexible menu-based propositions to better aid retention 15

16 We also believe that the self-select route may become increasingly common as it can help ensure a greater level of customer engagement and transparency around the buying process. This approach not only helps customers better understand what they are buying, but also supports greater loyalty as people can tailor their package as their needs change. There will almost certainly be more opportunities to innovative, for example around different lifestyles, family protection or for the growing older market. Those add-on products that offer the highest value travel insurance being one are likely to remain very popular, demonstrated by the fact that over 80% of packaged bank accounts now offer some form of travel insurance cover. As a leading travel insurance provider, FirstAssist is already one of the main suppliers to banks in this space and continues to innovate in this key area. A greater level of customer engagement and transperancy To the extent that delivering greater customer value could also lead to more claims, balancing claims cost containment with first-class customer support and service will become ever more important. This is an area in which FirstAssist has a distinct competitive advantage. With you every step of the way FirstAssist Insurance Services has many years experience in providing attractive insurance add-ons and helping its partners generate greater customer loyalty with innovative and future-proofed benefits that customers value and need. 16 FirstAssist Update - February 2013

17 We will continue to develop an attractive range of add-on insurance benefits for any partner employing a benefits-led strategy, whether this is bank accounts, cards, core insurance products such as home and motor, or membership schemes (see below for our current range of options). First Assist s current range of insurance product add-ons includes: l Lump Sum Accident and Sickness Cover l Lump Sum Redundancy Cover l Annual Family Worldwide or European Travel Insurance l Lump Sum in the event of a Heart Attack or Stroke l Lump Sum on Diagnosis of Cancer l Accidental Death Benefit l Life Cover (Annual) l Surgery Cash Benefits These are all built on our fundamental customer-centric design principles which take into account the voice of the customer, voice of our partners and the voice of the regulator. 1 Insurance Times, 19th December 2012 To find out more, please contact Jody Baker, Head of Business Development at jody.baker@firstassistinsurance.co.uk or on

18 Helping customers protect their lifestyles in these challenging times Recent consumer focus group activity that we have carried out in conjunction with YouGov within the 30 to 54 year old age group shows just how top of mind the consequences of a loss of earnings due to sickness, accident or redundancy is for people in this age group. The key issues are the negative impact on lifestyles, the ability to pay the bills (especially after three months being off work) and the stress and strain all of this cause for their families. Clearly, there is a very strong recognition of need when the focus is on protecting lifestyles. There is a very strong recognition of need when the focus is on protecting lifestyles However, a major consequence of the fall-out from Payment Protection Insurance (PPI) mis-selling has been to reduce much of the availability and market appetite for short-term income protection products, much of which is now concentrated through price comparison sites and IFAs. It s fair to say that the supply side has been heavily impacted by the issues around PPI. This all comes at a time when consumer debt continues to mount, unemployment remains high, savings are under pressure and more cutbacks and changes to Government support will further erode the limited welfare state safety net. So, just how does the industry rise to the challenge and deliver the affordable protection consumers need to ensure their lifestyles are not adversely impacted due to the consequences of redundancy, accident or sickness? 18 FirstAssist Update - February 2013

19 Further changes to the welfare system will reduce the safety net Last year s Autumn Statement aims to deliver a further 3.7 billion of savings to the Treasury s welfare bill in with below inflation increases to many working-age benefits further reducing the amount paid in real terms to those who are eligible. The consequences of more austerity are to erode already limited state provision. This year, changes designed to simplify the structure of the benefits system will be introduced in full from October The new Universal Credit will replace many benefits with a single payment. However, charities are warning that this will further diminish state provision for many disabled people, with up to half a million standing to lose out. Household savings are under intense pressure too We already know from a survey carried out by Unum in 2011 that most people would struggle with their bills if they had to survive for more than four weeks without full pay. However, a survey at the start of 2012 shows the position is getting worse not better. The findings published by the consumer publication, Which?, revealed that almost half of all UK households could survive for less than a week with rainy day funds if they were to find themselves out of work. This was based on savings of just 250 against average monthly outgoings of 1, Historically low interest rates are keeping repossessions in check According to Credit Action, the estimated average mortgage for the 11.3 million households that carry mortgage debt stood at 111,592 in October

20 Recently, the Council of Mortgage Lenders (CML) announced that the number of repossessions in the third quarter of 2012 was down again and now stands at its lowest level since This pattern is being driven by historically low interest rates and lenders showing increasing restraint with borrowers in financial difficulty. Whilst this is clearly welcome news, the figures mask the underlying upwards trend in arrears, with the number of people with the highest levels of arrears representing 10% of their outstanding mortgages now at 29, This shows the extent to which more and more borrowers are struggling to maintain their payments even with record low interest rates. The big question is the extent to which lenders will be able to keep absorbing this level of debt in their balance sheets, and at what point this becomes unsustainable. More and more borrowers are struggling to maintain their payments This all comes at a time when the base rate is under pressure from inflation, with the Bank of England continuing to balance the need to support economic recovery with trying to meet inflation targets. 20 FirstAssist Update - February 2013

21 10 key facts to illustrate the size of the UK s income protection problem: 1 At 2 Average 3 Every 4 1,399 5 Average 6 The 7 28% 8 32% 9 The 10 the end of October 2012, individuals owed nearly as much ( 1.42 trillion) as the UK produced in GDP during the whole of household debt (including mortgages) was 53,912 in October working day the Citizens Advice Bureau in England and Wales dealt with 8,465 new debt problems during the year ending June people a day reported they had become redundant between July and September consumer borrowing (including credit cards, motor and finance deals, overdrafts and unsecured loans) per UK adult was 3,184 in October number of people out of work in the three months to November 2012 was 2.51 million, or 7.8% of the working population 4 of all UK households have less than 250 in rainy day savings and 21% have no savings at all 1 of people would not be able to keep up rent or mortgage payments if they lost their primary source of income 1 proportion of families with income protection insurance fell from 11% to 9% in the year to May Only 20% of all mortgages holders have Mortgage Payment Protection Insurance (MPPI) cover in place 6 21

22 Consumers are living on a knife-edge The picture that comes through most strongly from this pattern of mounting debts, reduced insurance protection and the erosion of personal and state safety nets is the extent to which many people are living on a knife-edge when it comes to protecting the income that supports their lifestyles, families and homes. Every year there is always much debate about the protection gap, but what really worries consumers the most is the impact a loss of earnings would have on their lifestyles. This is a different way of looking at the same problem, but is one that consumers relate to. There is a strong recognition about the need for action The research we are doing with YouGov shows the extent to which there is a strong recognition about the need for action, but given the squeeze on household spend and the mis-trust of an industry struggling to work through the consequences of PPI, there is a very sizeable challenge in delivering the protection consumers need. The prize on offer is not only to win greater loyalty but also the reassurance from the credit provider s viewpoint that comes from knowing that core revenue streams are protected. Meeting the consumer need for affordable, accessible and simple protection The new breed of short-term income protection products, such as those offered by FirstAssist, continues to evolve. These offer customers comprehensive financial protection designed to ensure their lifestyles can be maintained in the event of sickness, accident or involuntary unemployment. The products offer choice, flexibility and full portability, ensuring they have broader appeal beyond just the specific financial commitment, which is usually focused on the mortgage payment. 22 FirstAssist Update - February 2013

23 However, with household incomes being squeezed ever harder due to continued inflationary pressures, particularly with gas and electricity, food and fuel prices all increasing, there is a need to explore other ways of delivering affordable protection that covers key commitments. This is where specific protection cover can be of benefit. Bill protection cover, for example, offers a simple, affordable and accessible way for customers to cover their key financial commitments by adding protection insurance cover to specific bills. This is especially pertinent for essential goods and services, such as groceries which now represent the second largest single monthly household expenditure at 11% as at May Grocery protection cover helps ensure that families can continue to maintain their food shopping expenditure if they were to suffer sickness, accident or redundancy. With the insurance benefits being paid in vouchers, this type of cover can be highly attractive as an extension to customer loyalty schemes for retailers too. But it s not only retailers that might want to consider offering bill protection cover; utility providers, telecoms and other organisations where they have customers that have a regular financial commitment, especially those that provide essential goods and services or lifestyle services such as gym memberships, all have a need to consider delivering their customers a cushion against hard times. There is a need to explore other ways of delivering affordable protection After all, customers want to be able to maintain their lifestyles no matter what happens. Maintaining customer loyalty to the service provider through offering additional protection which benefits customers when times are hard is a win-win scenario. 23

24 Winning greater loyalty If ever there was a time to properly address the income protection challenge it is now. With the continued evolution in product design and more certainty about sales processes, the time to act is now. FirstAssist, a leading specialist in this market, helps its partners deliver the protection their customers need and want in ways which are affordable, accessible and simple to understand, helping customers protect their lifestyles, through free-standing policies or with cover that can be added to a regular financial commitment. By offering appropriate cover, partners can build greater brand loyalty. 1 Which?, 11th January Credit Action, December BBC Business News, 8th November The Guardian, 12th December Aviva Family Finances Report Building Societies Association, 2011 To find out more, please contact Jody Baker, Head of Business Development at jody.baker@firstassistinsurance.co.uk or on FirstAssist Update - February 2013

25 Retaining customer loyalty in an uncertain travel market According to the recently published ABTA Travel Trends Survey 2013, the holiday market was very resilient once again in 2012 in the face of low consumer confidence levels and little sign of economic recovery. Office for National Statistics (ONS) figures showed holiday visits were down by 1% in 2012 while those for other purposes have increased. Overall, UK residents made just over 50 million trips abroad last year, much in line with But as we move into 2013, there is still much uncertainty over the travel market with continued low economic growth forecast in the UK economy and poor consumer confidence expected to make it another challenging year for the travel industry. The unpredictable UK weather has had a positive impact on overseas travel as families look to avoid the risk of another washout British summer. This has already helped TUI Travel s holiday bookings for 2013, which are up ten per cent on the same period in Many other ABTA Members are also reporting increases in forward bookings for this Summer, particularly for overseas holidays 2. These positive signs are also being fuelled by the growing pattern for customers to seek better value from their holidays, with a key trend being for consumers to book earlier. Recent ABTA research shows that over a third of consumers booked their holiday further in advance in 2012 compared to the prior year with the top reason for doing so (68%) being to secure better deals and / or cheaper prices 2. 25

26 Feedback from the ABTA Consumer Trends Survey shows yet again that holidays are the item consumers would be most unwilling to cut back traveller numbers on. This, combined with the increase in advanced bookings indicates that maybe 2013 will start to see an increase in UK traveller numbers and the market turning the corner. The bad weather combined with a weakened Euro is likely to shift the focus onto popular European destinations, such as Spain and Greece. This shift towards short-haul may also be driven by the further 2.5% increase in Air Passenger Duty which cuts in from April Maybe 2013 will start to see an increase in UK and the market turning the corner According to a survey carried out by World Travel Market in November 2012, almost half of UK holidaymakers admit the increase will have an impact on their travel plans with more than a quarter saying that as a result of the increase in duty they will only take a short-haul break in This is echoed in the findings from the 2013 ABTA Travel Trends Survey. The key pattern is that with many household budgets being tightly squeezed through inflationary pressures, most customers, especially in the mass market, are continuing to demand better value for money and more certainty over their budgets. This is reflected by ABTA research that shows a shift back towards packaged holidays and growth in demand for all-inclusive holidays. What does this mean for travel insurance? This need for more certainty over budgets is also reflected by the pattern of increasing levels of risk aversion seen over the last few years. We would expect this to continue, which is encouraging for the travel insurance industry. Having made the decision to invest in an overseas holiday, more than ever customers want to know they have adequate protection in place. This makes travel insurance one of the most widely adopted type of insurance, with around 80% of people going on holiday taking out cover FirstAssist Update - February 2013

27 So what do travel insurance providers need to do to ensure they continue to win the loyalty of their customers during these uncertain times? Given the squeeze on family budgets and drive towards value, some consumers might be tempted to go without insurance cover or decide to take out the cheapest cover without adequately checking the scope and levels of cover. This makes education vitally important, particularly where customers are travelling to European Union countries. According to various surveys, on average, 20% of travellers to Spain, Greece and other key EU destinations do not see the need for cover, believing that the European Health Insurance Card (EHIC) provides adequate protection. The key message has to be that as further austerity measures across the Eurozone continues to reduce the scope for free treatment for nationals of participating countries, this will have a knock-on impact on the scope of EHIC. EHIC is no substitute for travel insurance. The other major consideration for travellers and holidaymakers to Eurozone countries is the impact continued economic uncertainty in these countries might have on travel plans. Consumer confidence is key here, as whilst many recognise the value on offer particularly from Spain and comprehensive Greece, fears about the Eurozone will also drive protection the need for comprehensive protection. This underlines the need for customers to ensure they are adequately protected against the possibility of travel disruption, especially where they are travelling independently and do not have the protection afforded under ATOL. Fears about the Eurozone will also drive the need for Comprehensive Travel Disruption Cover, such as that offered by FirstAssist, should therefore be offered as an essential part of a travel insurance proposition. 27

28 Effective cost containment is becoming ever more crucial, particularly in this market where value for money is such a key factor for many customers when making purchase decisions. The need to keep claims costs down whilst maintaining service to ensure cost-conscious holidaymakers can continue to have access to competitive travel insurance, whilst ensuring margins are maintained, has never been more important. Those companies that excel in this area, such as FirstAssist, are able to offer partners a distinct competitive advantage. Winning loyalty is also about improving the overall experience. Winning loyalty is also about improving the overall experience. Initiatives aimed at enhancing this for the overwhelming majority of customers who never claim are also important, especially in the context of retaining customers and encouraging repeat purchase in the face of an ever more competitive market. FirstAssist s Call us First initiative is aimed at encouraging customers to use our services when most in need by calling us first for advice, and guidance to the right facilities rather than using local representatives and concierge services. This means we are able to leverage our global expertise to better support customers by providing assistance when they need it, offering a high quality consistent service to all customers which ensures that their insurance cover goes beyond being just a piece of paper. 28 FirstAssist Update - February 2013

29 An all-embracing proposition offering a wide choice of benefits We believe that offering an all-embracing customer proposition along with a wide choice of cover options allows our partners to cater for all of their customers needs and to cater for key segments such as independent travellers and the older market. Our approach is to offer cover for almost every underwriting risk whilst at the same time providing a range of insurance benefits and assistance support that offers customers a comprehensive package of protection. As the travel insurance market continues to evolve in response to changing customer needs and purchase behaviour, FirstAssist will continue to be at the forefront of new product development and initiatives aimed at equipping partners with the very best proposition available in the market today. By doing so, our partners can continue to win the loyalty of their customers and grow their travel insurance revenues. 1 This is Money, 27th September ABTA Travel Trends Survey, ABTA Travel Trends Survey, Money Week, 29th October 2012 To find out more, please contact Jody Baker, Head of Business Development at jody.baker@firstassistinsurance.co.uk or on

30 Spotlight on: Travel Insurance Plus People are living longer, enjoying more active lifestyles and the over 55s in particular are considered to be more resilient to the on-going tough economic conditions. The increasing numbers of older consumers are also travelling more, making it a key growth areas for travel, with recreation and travel the only area of major household spend that rises post-50. However, the risk of developing more serious and multiple medical conditions also rises markedly with age. Last year, FirstAssist launched Travel Insurance Plus our 100% inhouse sales solution for older customers and those with serious or more complex medical conditions. This is the best solution in the market today for non-standard risk customers who exceed medical thresholds or age limits, allowing partners to provide an enhanced product offering and improved service. Age-related charities, amongst others, continue to scrutinise the effectiveness of the ABI s signposting service, which came into effect in April This means that the ability for partners to provide the most customer-centric solution for customers of any age is becoming increasingly important. 30 FirstAssist Update - February 2013

31 insurance services For over two decades, FirstAssist Insurance Services has been a silent partner in our markets working behind many of the UK s largest brands. We deliver specialist and bespoke white-label insurance solutions which generate many millions of pounds of additional income for our clients each year whilst extending their customer propositions. In that time, we have built an enviable reputation as one of the UK's leading providers of white-label solutions across our core areas of insurance expertise: travel, protection, health, life, accident and legal protection. Driven as a specialist business by an entrepreneurial, commercial management team, we provide a unique range of products and flexible marketing solutions for banks, insurers, affinity organisations, corporations, intermediaries and small and medium-sized enterprises. FirstAssist Insurance Services was acquired by Cigna in November 2011, which further enhances our capabilities with access to a broader range of health, life and accident products and the benefits of Cigna s global expertise and infrastructure. We provide award-winning levels of customer service to nearly three million customers. With over 160 individually tailored schemes through major UK brands, we know one size does not fit all. From the commercial arrangements to the regulatory relationship, from a full service stand-alone product proposition to wholesale risk provision, we will custom-design the perfect solution to meet your customers and business needs. 31

32 insurance services FirstAssist Insurance Services Limited, Marshall s Court, Marshall s Road, Sutton, Surrey, SM1 4DU Registered in England & Wales No Authorised and Regulated by the Financial Services Authority FirstAssist Insurance Services Ltd. is part of Cigna.