Life insurance can be very complicated to sort out, especially when selling directly to the consumer? With digital channels improving and penetration of them high, does this have to remain the case?
Founder of Dead Happy, Phil Zeidler, believes that these antiquated methods are no longer necessary.
Speaking to Verdict Insurtech, he says: “There are no other products that you keep for 25 years. Full stop. Even mortgages these days are normally three-to-five year products.
“You can work out the average persistency of these policies. The customers hold them, on average, for between six and nine years. So something tells me that the policies are not fit for purpose. No one constructs any other product this way so why are we doing it for life insurance?”
Dead Happy certainly does not construct its products in a traditional way.
One feature that has garnered attention is its “Death Wishes”. These allow customers to pick and choose exactly what they want to happen when they die. Potential wishes range from standard options, like paying off their debts, to funding a wake party to sending someone on holiday. The customer can also create their own specific wishes.
Dead Happy’s premiums are priced by age and risk level, meaning the younger the customer starts the cheaper the policy will be.
“The second issue is compounding,” Zeidler continues. “It averages the price for the whole 25 years. Anyone can tell you, my five year old nephew could tell you, that you're more likely to die when you're older than when you're younger.
“Very obviously if you're averaging the price then you must be overpaying in the early years of the policy to compensate the later years. Why do we do that? Why do you not just charge the risk rates, which is what everyone else does for every other policy? And then just increase it a little bit every year? That's the same as every other insurance.”
According to research from Dead Happy, the UK is overpaying close to £1bn ($1.29bn) because of this model.
Dead Happy is aiming for the younger customer, perhaps those that are buying life insurance for the first time.
There is potential for massive gains in this segment. According to GlobalData’s 2018 UK Insurance Consumer Survey, only 16.8% of 18–25 year-olds hold a personal life insurance policy, while the overall penetration for that policy was 22.2%.
Zeidler says: “We don't see that we'll ever get much traction in getting people to switch. Switching has been a horribly difficult process for people. They’re like ‘My god, I never want to do that again’ and understand that.
“We’re aware most of our business is people coming for the first time to the market or people that have generally people have been put off life insurance because of the horrendous process and how time consuming it is.
“We choose to appeal to them with a very different tone of voice. You don’t market any other product with such a fear mongering message. Do this now or you're doomed. It's a distress purchase and you don't sell any other product that way. We don't have to do it that way.
“We think if the customer doesn’t need the policy, then the customer shouldn't have the policy. It is our job and our duty to make sure it is fit for purpose.”
“From a brand perspective in the B2C market, it's a way of engaging more effectively with our younger market. Actually, it doesn't have to be dull and boring.”
However, Zeidler is adamant that the sector needs to change.
“It's just strange and this is not rocket science, this is not clever stuff, it's obvious. Why do we think it's okay to sell someone a long term policy and then not require anyone to go on check that it is fit for purpose?” he asks.
He continues: “The insurance companies don't contact customers because they're scared customers will cancel their policy. The reason they're going to cancel is because it is not fit for purpose. Surely that is therefore inappropriate. They should be contacted to make sure it is fit for purpose.
“We think if the customer doesn’t need the policy, then the customer shouldn't have the policy. It is our job and our duty to make sure it is fit for purpose.
“Any business that is failing that is fundamentally failing their customer and their obligations.”
While Dead Happy gathers less information at the beginning, which makes the price higher as they’ve “already charged the risk rate”. Information gathered over time would make it cheaper. However, it can only accept 60% of applications because “we don’t go deep”.
With such a different model, something consumers are not used to, some might consider it to be a death wish itself. Zeidler is confident of success. He concludes: “When people buy from us, they'll never buy from anyone else.”