When customers cancel: turning a hard conversation into an opportunity

The Financial Services Council’s latest quarterly snapshot of the life insurance sector carries a familiar tension. Overall premium revenue continues to grow but the number of policies in force has fallen. The most likely explanation is straightforward: in a tough economy, some New Zealanders are quietly letting their cover lapse.

We put that picture to two of our Christchurch-based team, Regional Manager Mike Doherty, and Business Partnership Manager James Dunbar. Their take: this is less a reason for alarm than a prompt for Advisers to lean in, because Chubb has more tools to retain cover than many customers (or Advisers) realise.

Mike Doherty identifies a few forces at work. Cost pressure is the obvious one: when household budgets tighten, life insurance is often one of the first things to go. But demographics play a role too. An ageing population means many older policyholders have paid off their debts and no longer carry the liabilities that made cover essential in the first place. And the tradition of leaving a meaningful estate - the old idea of a legacy built through a life policy - is less prevalent than it once was.

The picture looks different for younger customers, however. As James points out, thirty-somethings today often carry mortgage debt that would have seemed extraordinary to their parents’ generation. That gives them a concrete, pressing reason to hold life cover and a compelling argument for locking it in early, while premiums are at their lowest. It also means that dropping life cover when financial pressures increase can seem like a prudent idea. But James says that can have long term financial implications.

“For someone in their late twenties or early thirties, premiums won’t be cheaper than they are today. If you can lock in level cover now, the savings over a lifetime are considerable,” he says.

James encourages Advisers to put options in front of customers who are cancelling cover through financial pressure. Specifically, he encourages Advisers to familiarise themselves with the new monthly disability conversion option.

This new option was released by Chubb Life on 5 May (alongside Life Lens).  It allows customers holding income protection or mortgage repayment cover, to convert their monthly income protection benefit to a less expensive lump-sum complete disability cover. It’s a more limited form of protection, but it keeps something on the books and it keeps the relationship intact. The conversion is easy too, it doesn’t require any fresh medical underwriting.

For Advisers, this turns what might have been a cancellation call into a retention conversation. When a customer rings to say they can’t afford their premiums, there’s now a genuine alternative to offer them - one that requires no new health assessment and preserves meaningful cover at a reduced cost.

Mike Doherty has always been a champion for extracting value out of the policy during the lifetime of the policy.

“Too many customers see a term life policy as only there for the very worst moments. The truth is, there’s a lot of benefits that can be extracted over a policy’s lifetime. We should all be encouraging customers to take advantage of the benefits,” he says.

Chubb Life policies include a suite of client benefits, triggered by a qualifying life event, that policyholders can access each year. These include:

• Will preparation - up to $1,000 towards the cost of having a will properly drafted by a lawyer
• Wellbeing and grief counselling services
• Nutrition and fitness advice (where referred by a GP)
• Career counselling
   

 A full list of benefits is available on our website here.

Life events that can trigger access to benefits are broadly defined. They can include moving house, refixing a mortgage, getting married or divorced, having children. The intent of the Client Benefits packages is for advisers to bring them up at review time, reframing the conversation from “your premiums are going up” to “here’s how you can get $1,000 of value out of your policy right now.”

Mike says if a customer is thinking about cancelling because cost has become the only thing they can see, knowing they haven’t yet claimed their Client Benefits , which is often worth three or four times the annual premium increase - can shift the balance.

The FSC data is a useful prompt. When the headline is “people are cancelling cover,” the Adviser’s instinct might be to brace for the conversation. But Mike and James make a compelling case that this is actually the moment to be proactive — to get in touch with customers before they cancel, remind them what they’re already entitled to claim, and, where affordability really is the issue, offer a genuine alternative that keeps some protection in place.

For more information on the monthly disability conversion option or client benefit entitlements, contact your Chubb Life Business Partnership Manager.