RESEARCH BRIEF
December 2009
Disclosure of ’total premium’ for pure protection
contracts – Cragg Ross Dawson
Qualitative research into customers’ perceptions of different
approaches to presenting total premium
Executive summary
Our research found that those who purchase pure protection products (life, income
protection and critical illness insurances) have to decide that these are necessary (given
the potential consequences of not having them) and affordable, and that they are
confident that the provider will pay out in the event of a claim. Having decided that they
need these types of insurance, they see premiums as an expense rather than an
investment, and judge them on their monthly affordability. Thus a choice between two
quotes involves a balance between monthly affordability and their confidence that the
provider will pay out – most are happy to pay slightly more per month if they can afford
it, if the reputation of the provider seems to justify this. The total premium (the amount
that the customer will pay over the term of the contract) of the insurance is rarely, if
ever, considered, and in any case seems irrelevant to monthly affordability.
Few respondents, therefore, felt that disclosing the total premium would have much, if
any, influence on decisions about insurance products. Total premiums were at odds with
the way they thought about the affordability of insurance, and often seemed irrelevant
and unrealistic given the long timescales involved. That said, total premiums were
thought to add to the impression of transparency and openness from a provider (much as
they did for mortgage quotes), and to be useful for that reason alone.
Once they thought about it, most respondents wanted the total premium disclosed on the
basis of greater transparency (and because they were used to seeing it on mortgage
loans). However, they did not expect to use it as a comparator or for considering
affordability. There are also potential disadvantages to disclosing total premium: some
respondents expressed concerns that the difference between two total premiums might
steer them towards a policy that was less appropriate for them.
In light of this, some of the disclosure options tested were thought preferable to the
current practice of not disclosing total premium, but none was expected to aid or
influence choices between quotes or to help with considering monthly affordability.
Quoting a single figure – the premium over the whole term – was most popular (among
those who saw it), although the timescales involved were so long as to seem irrelevant or
unrealistic to some. This was followed by a series of ‘total premium’ figures illustrating
premiums over one, five and 10 years, which, while more realistic, was more complicated
and felt less transparent. In both instances, repeating the potential payout was widely
preferred to leaving this reminder out, as it set the total premium figures in context.
Options giving a dummy calculation and a telephone number to call for the total premium
figure were widely rejected, at least in part because they added nothing to the
impression of transparency (and could even reduce this).
Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Introduction
Research background
The FSA will require quotations for insurance policies to include information on the
product’s ‘total premium’ – the total amount that the customer will pay over the term of
the contract. This can be provided as a single figure (if the contract is for a fixed term),
or as a means of calculating a figure (if the length of the contract is not known).
The ABI commissioned research among customers of the insurance industry to determine
how insurance providers can comply with the FSA’s requirements in a way which is most
appropriate to customers’ needs. Three types of insurance were of interest:
income protection
term life insurance
whole-of-life insurance
Critical illness insurance was also relevant, but was considered close enough to term life
insurance in the way that total premiums might be disclosed for the findings on the latter
to apply.
The FSA produced three potential options for disclosing total premiums:
a declaration of the total premium over the period of the plan;
illustrations of the amounts that will have been paid after certain milestones
within the fixed term of the contract, or during an open-ended contract (one year,
five years, 10 years etc); and
versions of the above options noting the fact that premiums and benefits are
subject to review, and explaining that a recalculated disclosure will be sent to the
customer if premiums are changed.
Building on these, the ABI produced three further options:
‘call us’ – a telephone number which the customer can call to obtain a total
premium figure is provided, but the figure itself is not included in the disclosure;
‘working it out for themselves’ – a description of the calculation needed to work
out the total premium, either over the full term of the plan or at milestones, in
addition to the total premium itself; and
‘illustrate the benefit’ – a disclosure of the total premium either over the full term
or at milestones, accompanied by a statement about the lump or regular sum that
will be paid out in the event of a successful claim.
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Objectives
The ABI wished to explore the reactions of customers with the three types of insurance
mentioned above to model disclosures based on these six options. Of interest was:
the fit between the level and presentation of information in the disclosures and
customers’ needs and understanding;
the extent to which the disclosure allowed for and aided comparison across
different products;
the value of the disclosures as compared against the current ‘baseline’ situation
where the total premium is not disclosed; and
the possible downsides to providing more information.
Methodology and Sample
Fieldwork comprised 32 paired depth interviews with owners of, and those seriously
considering owning, four types of insurance:
the three types mentioned above; and
mortgage protection insurance (originally positioned as a subset of term life
insurance, but given equal weighting with the other three types in the research on
the basis that many people with mortgages will own this type of insurance but not
necessarily term life insurance, and that decisions about insurance which has a
level of cover and a term dictated by the mortgage, and is widely recommended
for this purpose, could potentially differ from the less tightly defined decisions that
need to be made about term life insurance).
Of the 32 paired depth interviews, 20 were with couples to reflect and explore the
dynamic in which household decisions about insurance and other financial products are
made. The remaining 12 interviews were with pairs of friends, to assess the reactions of
single people and of partners in a different environment. These interviews were divided
equally between the four insurance types noted above: term life insurance, mortgage
protection insurance, income protection insurance and whole-of-life insurance were each
owned or being seriously considered by five couples and three pairs of friends.
Discussion comprised a brief exploration of respondents’ views of and attitudes towards
insurance, focusing on perceptions of premiums and the way in which decisions about
policies were made. Respondents were then shown, in random order, mocked-up
insurance quotations corresponding to the following disclosure models:
Option 1: ‘telephone number’
Option 2: ‘calculation’
Option 3: ‘series of figures’ (total premiums at 1, 5 and 10 years)
Option 4*: ‘single figure’ (total premium over the term of the policy)
Option 5: ‘series of figures’ with a repetition of the potential payout
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Option 6: ‘series of figures’ with a note about reviewable premiums
Option 7*: ‘single figure’ with a repetition of the potential payout
Option B: the baseline, with no total premium information
* Options 4 and 7 were not shown to whole-of-life policy owners, as by definition they
had no finite term to their policy.
Having seen and commented on the usefulness, clarity and value of each model in itself
and as an aid to comparisons between quotes, the models were ranked and scored using
the following system:
first, respondents were asked to rank the disclosure models (including the
baseline) in order of preference, based on general clarity and usefulness
next, each model was scored with reference to the baseline (set at 0) on a scale
from –5 to +5 in terms of its:
influence on their perceptions of insurance (whether they were more or
less likely to buy insurance of that type having seen the total premium
information)
value as a cost comparator
The purpose of this exercise was to measure strength of feeling about each model, and
to impose as much consistency and objectivity on respondents’ scores as possible.
The scores, and respondents’ sampling criteria, were then arrayed on a spreadsheet and
inspected visually to gain an impression of how each model faired and what different
types of respondent preferred. It was recognised that the way in which respondents
judged the models would never be wholly consistent, but the number of interviews and
the fact that the results were intended to be analysed qualitatively rather than
quantitatively was nonetheless expected to add rigour and transparency to the
qualitative findings. The scores are used as evidence of respondents’ views throughout
the report.
Fieldwork took place in London, Birmingham, Manchester and Edinburgh to ensure a
good geographic spread of respondents. It was conducted by Ben Toombs, Rob Hartley,
Lisa Malangone and Tim Porter between 11 and 25 August 2009.
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Table 1 – Breakdown of 20 paired interviews with couples
Depth
Insurance type
Age
Social grade
1
Term Life Insurance (TLI)
30s
B
2
TLI
40s
C1
3
TLI
40s
C2
4
TLI
50s
C1
5
TLI
60s
B
6
Mortgage Life Insurance (MLI)
30s
C1
7
MLI
30s
C2
8
MLI
40s
B
9
MLI
50s
D
10
MLI
60s
C1
11
Income Protection (IP)
30s
B
12
IP
40s
B
13
IP
50s
C1
14
IP
50s
B
15
IP
60s
B
16
Whole-of-Life Insurance (WLI)
60s
B
17
WLI
60s
C2
18
WLI
60s
C1
19
WLI
70s
C1
20
WLI
70s
C2
Table 2 – Breakdown of 12 paired interviews with friends
Depth
Insurance type
Age
Social grade
21
Term Life Insurance (TLI)
40s
B
22
TLI
50s
C1
23
TLI
60s
C2
24
Mortgage Life Insurance (MLI)
30s
B
25
MLI
40s
C2
26
MLI
50s
C1
27
Income Protection (IP)
30s
B
28
IP
40s
C1
29
IP
50s
B
30
Whole-of-Life Insurance (WLI)
60s
C1
31
WLI
60s
C2
32
WLI
60s
B
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Main findings
Perceptions of insurance
Views of different types of insurance
Most respondents held several different types of insurance, in addition to the form for
which they had been recruited. The most common were travel, car, pet, household
(buildings and contents) and mortgage protection (ownership of which went far wider
than those recruited for this sample sector). They tended to feel that they were fairly
‘comprehensively insured’ and they seemed to recognise the need for insurance in
general and the value of it in ‘peace of mind’ terms.
“It‟s value for money if you claim, yes, very much value for money. The intangible
side is, you sleep easy in your bed knowing that if the house goes up in flames it‟s
already paid for. So, you can‟t quantify it, it‟s more of a qualitative feeling of
reassurance. It is peace of mind.”
Paired depth 2: couple, 40s, C1, term life insurance
Two important characteristics were thought to separate life and income protection
insurance from other forms: they are not legally required; and they involve relatively
large amounts of money (in terms of both premiums and benefits). A third characteristic
of income protection (and critical illness insurance) that was also frequently noted was its
complexity: the number of clauses and options that affect what is covered and how much
it costs. (Life insurance was expected to be much more straightforward, as most thought
there would be few instances of death that would invalidate a claim.)
As a result, most decisions about life and income protection insurance had been taken in
two stages: first, whether or not to take out insurance at all; second, having decided to
do so, which of the costs / features would best suit their needs. By comparison with car,
household and (to an extent) travel insurance, which were seen as legally required,
cheap and/or straightforward, decisions about life and income protection (and critical
illness) insurance had been more involved, well-researched and significant.
Having said this, once they had decided to take it out, most respondents did in fact think
of their life and/or income protection insurance as necessary, given the potential
consequences for themselves and loved ones of not having it. Those with mortgage
insurance wanted to ensure that their partner would keep the house if they were to die
or become unable to work; those with term life insurance wanted to provide for their
dependents if they were to die; those with whole-of-life insurance wanted to avoid
leaving their offspring with a bill for inheritance tax or funeral expenses; those with
income protection wanted to shield their immediate family (and themselves) from the
loss of their earnings. Once they had decided that they did not want to risk these things,
insurance became an emotional necessity, not an option.
“It is hard to convince yourself to start with that it is another necessary expense. I
think it is.
When you start to get a bit older and realise you still have young
children and are hitting an age where we could have an illness. If I did get cancer
and couldn't work, the family's life would be very different. It is more important
than car insurance. If you crash your car, you can buy another.”
Paired depth 11: couple, 30s, B, income protection
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Choosing policies
This way of looking at life and income protection insurance had a strong influence on the
way that respondents went about choosing policies and providers. Above all, they
wanted to be sure that they had the right policy for them. Cost came into this: all other
things being equal, almost all said they would choose the policy with the lowest
premiums. But other things were seldom thought to be equal, and other considerations
such as the details of the policy (what is covered and what exempted), the chance of
there being hidden clauses, and the reputation of the provider, also influenced choices.
Ultimately, respondents wanted to be confident that the policy they had chosen with their
loved ones in mind was affordable and would pay out the sizeable benefits involved if
these were claimed.
As such, it was in fact rare for respondents to say that they had gone for the cheapest
option available; most said they were prepared to pay more to go with a reputable (by
which they meant familiar) provider, on the assumption that they would be treated better
if they needed to claim. Thus a choice of life or income protection insurance rarely came
down to a simple cost comparison. This was in stark contrast to their attitudes to car
and travel insurance: most wanted to fulfil their legal obligation under the former as
cheaply as possible; and the policies offered under the latter seemed similar and simple,
so those interviewed saw no reason not to go for the cheapest option.
“I would pay the extra to go with someone I had heard good things about.”
Paired depth 28: friends, 40s, C1, income protection
“The only thing I have got against it, it all seems like, they are always constantly
looking for a way out of paying, even if you sign in the wrong place or your
signature is too big, it‟s something I don‟t trust. That is why I would rather go to a
big company.”
Paired depth 7: couple, 30s, C2, mortgage life insurance
“I do that with car insurance: the cheapest is the one I go with.…as long as you are
covered to a degree that is all I care about.
With this [income protection], I
wanted a company I knew and recognised and could have some degree of
confidence in. We did go through a lot of the small print. It was probably the fact
it was something we weren't familiar with. You take car insurance every year from
when you are 17. Same with mortgage protection and travel insurance. You know
what to look for. I didn't really know what to look for with income protection.”
Paired depth 11: couple, 30s, B, income protection
Judging affordability
The emotional requirement for life and income protection insurance that most
respondents felt had a second bearing on the way they thought about their policies.
Almost all saw them as a necessary expense, something they had to pay rather than
wanted to pay. Since premiums were due monthly, and since they had to be budgeted
for as a regular expense rather than an ad-hoc investment, they were in almost all cases
seen as a monthly outgoing.
“You‟re not thinking about cash in investment and return for insurance, you‟re
thinking about monthly premiums, so that‟s why I‟m thinking monthly.”
Paired depth 2: couple, 40s, C1, term life insurance
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Policies were therefore judged on their monthly affordability; it was very rare for
respondents to take a longer view and consider how much their policies cost them every
year or over a longer period. When prompted, women and older respondents did seem a
little more interested in the idea of long-term cost than men and younger respondents,
but they had rarely thought to make this calculation for themselves. Long-term cost did
not seem relevant to the affordability of the policy; and indeed some younger
respondents in particular seemed not to want to think about it because they had decided
that the optional product was in fact necessary and manageable, and they did not want
to be dissuaded of this.
WOULD YOU WANT TO KNOW HOW MUCH YOU WERE PAYING IN THE LONG RUN?
“If I was happy and could afford to pay such a premium per month, in the long run
it is a safety net. If I stop paying I am stuffed, so no, I wouldn't.”
Paired depth 27: friends, 30s, B, income protection
“All I need, for me, is the monthly payment rate to make sure I can afford it,
because all this stuff just puts me off.”
Paired depth 7: couple, 30s, C2, mortgage life insurance
“It‟s like everything: you earn a wage, and out of that wage I‟ve got to pay the
mortgage, and I‟ve got to pay that and that, so it‟s got to be something you then
put into your overall budget. I want it, can I afford it?”
Paired depth 16: couple, 60s, B, whole-of-life insurance
Views of total premium
Value as a cost comparator
For most respondents, the points made above argued against the value or relevance of a
total premium as information in itself, as it was at odds with the way they saw, and wanted
to see, life and income protection insurance. The use of total premiums as a cost
comparator did not ring true either. Having decided that they needed such insurance, and
that their monthly income could cover the additional monthly expense, they wanted an
affordable policy that best suited their needs. When choosing between quotes, almost all
said they would balance the difference in monthly premiums against their confidence that
the providers would pay out. If they were equally confident in both options, even a small
difference in monthly premium would push them towards the cheaper policy; a total
premium would not influence or confirm this decision. If they were not equally confident,
they would be prepared to pay slightly more per month for the ‘safer’ option, provided they
thought they could afford this monthly increase.
“See, I‟ve switched off now.
wouldn‟t even look at it.
This total premium, with all this information, I
All I‟m interested in is the monthly payment…
I don‟t
really need to know how much I‟m going to pay because I‟ve got to have it
anyway.”
Paired depth 7: couple, 30s, C2, mortgage life insurance
Aggregating the premiums was expected to make even a slight difference in the cost of
two policies more obvious, but many felt that such a comparison would not be realistic.
A saving of a few hundred (or even thousand) pounds might seem worthwhile, but not
over the 30 years or so that it would take to materialise. In any case, with the exception
of term life insurance, few expected to hold individual policies for that long – mortgage
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
and income protection insurance would be changed as deals and circumstances changed,
so the aggregated savings would not appear.
“£240 difference over 25 years. That sort of money wouldn't encourage me to go
for a cheaper option. I wouldn't pick one over the other. I would pick it because of
what I knew [about the provider].”
Paired depth 11: couple, 30s, B, income protection
“£200 over 10 years is nothing. I can't believe these will all be exactly the same,
there will be other factors.”
Paired depth 30: friends, 60s, C1, whole-of-life insurance
Some even worried that this difference in total premium, however unrealistic it might be,
risked pushing people who did lose sight of the timescales involved towards a policy they
felt less confident about, despite being able to afford the preferable option’s higher
monthly premiums.
The idea of a total premium was therefore widely thought
unnecessary and irrelevant to a choice based on monthly affordability, and at worst
problematic as it might persuade people to choose a policy that was less appropriate for
them.
Value as reassurance about transparency
However, this is not to say that total premiums were seen as pointless. Rather, many
respondents felt that they should be given as much information as possible about all
financial products, and that total premiums would be interesting, and even desirable, on
this level. Many spontaneously saw parallels between disclosing the total premium and
declarations about the total cost of a mortgage or personal loan; and most others
recognised this similarity when prompted. They saw this type of declaration as standard
practice, and often commented that it probably added something to their confidence in
the provider because it gave the impression of openness and a lack of hidden catches.
“I don't think this [the total premium] is normally on there. People don't tend to
ask long term, what it adds up to in the long run. I think it is good if it is there, so
you can read it if you are interested.”
Paired depth 27: friends, 30s, B, income protection
In this more general sense, therefore, there was a lot of support for disclosing the total
premium: most respondents’ overall preference was for it to be included on a quotation;
and few felt it would look out of place (once they had got used to seeing it) because it
appears on other types of quote. But its association with mortgage quotes is also
instructive when considering its value in comparing insurance quotes. Few said they paid
any attention to the total cost of their mortgage offer: as with insurance, it was seen as a
necessary monthly expense, and since that particular mortgage is unlikely to be held
over the full term, the full cost would never be paid. Certainly, it would never have
occurred to any respondent to use the full cost as a basis for comparison between
mortgage quotes.
“To be honest, when I took the mortgage out, they said: „This is how much you‟re
going to be paying back.‟
I don‟t look at that because it‟s something you‟ve got to
have, so you just do it.”
Paired depth 7: couple, 30s, C2, mortgage life insurance
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
“Better to have the information.”
“I agree. You are used to it as well, you see it with so many things. I am sure
there is a legal requirement with some loans. You sort of expect to see it there.”
Paired depth 11: couple, 30s, B, income protection
In fact, there are reasons for supposing that a total premium is even less likely to
influence a choice between insurance quotes than the full cost of a mortgage. Since
mortgages involve the consumer paying the provider (once the loan has been made), the
reputation of the provider was a lesser consideration than for life and income protection
insurance, where the consumer needed to feel confident that the provider would pay out
if necessary. This made pure cost a more significant factor in decisions about mortgages
than choices about life and income protection insurance, so disclosing the total premium
was seen as even less useful as a comparator for insurance than it was for mortgages.
In short, the most common considered response to the idea of disclosing the total
premium was muted interest. Respondents valued its inclusion to the extent that it
suggested the provider was being as open about its product as possible, and on this basis
generally thought it should be included on a quote. But a decision between two policies
would be based on a combination of the level of the monthly premium, the fit between
the detail of the policy and their circumstances and needs, and their confidence that the
provider would actually pay out in the event of a claim. Having made their choice, most
thought they would probably glance at the total premium in much the same way as they
would for a mortgage (i.e. out of interest), so it would have little bearing on their
decision, although it might be reassuring.
“They‟re trying to be transparent and honest upfront, but they‟ve still got a way to
go. But it‟s a step in the right direction.”
Paired depth 14: couple, 50s, B, income protection
“I don't think it helps you to compare quotes. But it gives you more confidence in
that particular company.”
Paired depth 30: friends, 60s, C1, whole-of-life insurance
Response to the disclosure options
Overview
Three general points about the way in which respondents viewed all the disclosure
options are worth making at the outset. First, as noted above, although few respondents
were surprised or confused to see the total premium information on the quotes, almost
all took it as evidence of transparency and a wish to give full information about the
policy. It was rarely obvious to them that the total premium could be used as a cost
comparator, and even when this was suggested to them, it did not often seem useful in
this sense.
Second, whether the total premium was valued for its impression of transparency or as a
cost comparator, there was a clear preference for simple information on the quote itself
over more complex information and/or the need to look elsewhere for it. Third, the
concept of a total premium, and the calculation needed to work it out from the monthly
premium, were also thought very simple. Although few would think to make the
calculation, none thought they would be unable to work out how to do it for themselves if
prompted.
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
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“Anything that gives you information is making it clearer.
If the information is
clear, it has to be a bonus. I'd rather have it down in black and white than fiddle
with it myself.”
Paired depth 30: friends, 60s, C1, whole-of-life insurance
All this directed most respondents towards a clear preference for one or two of the
approaches to total premium disclosure, and a clear rejection of one or two others. But,
as discussed below, the assumption that the information is given in the interests of
transparency, bolstered by the preference for simplicity and the rejection of options
which might persuade them to calculate the figure themselves, made it very unlikely that
the information would be used as a cost comparator.
Respondents’ views of the disclosure options were therefore primarily based on the effect
that the information would have on their perceptions of the insurance and provider they
were considering.
Even when pushed to comment on the options’ value as cost
comparators, many found it difficult to do so, and it was definitely a secondary
consideration for those who did. In real life, therefore, total premiums seem very
unlikely to be used as cost comparators. This means that the disclosure options need to
be judged at least as strongly on their impact on perceptions of insurance as on their
value as cost comparators. (Similarly, total premium was not seen as relevant for
assessing affordability – this was best done using monthly premiums.) Accordingly, this
aspect of each one is considered first.
A single figure – the total premium for the whole term (Options 4 and 7)
At a general level, showing total premium for the whole term was the most widely
preferred approach to disclosing total premium. It was shown in two forms (with and
without a reminder of the potential benefit – Options 4 and 7 respectively), and only to
those with finite-term policies (i.e., not whole-of-life insurance). Among those who were
shown them, almost all chose one of these two options as their first preference overall.
The few who did not fit this pattern tended to be owners of income protection insurance
(there seemed to be a clear reason for this, as discussed below), and/or to have chosen
the baseline option as their first preference – i.e. they did not want any disclosure of
total premium of any type.
Pros and cons of Options 4 and 7
The main virtues of this approach were simplicity and intuitiveness: it was a single figure
which few were surprised to see because it seemed natural that it should be there. This
type of information was familiar to many from mortgage and loan quotes, in which
context (as noted above) it was rarely used but added to a sense of transparency. Few
questioned its inclusion on an insurance quote, even though a number commented that it
is not currently included, and most thought it better to include it than to omit it on the
basis that more information about financial products is better than less.
“This last one [option 7] is clear to me. This is how much you are going to pay in
total and this is how much you are going to get.”
Paired depth 11: couple, 30s, B, income protection
Some felt that such a large figure might make some people think twice about taking
insurance, although they were rarely very concerned about this. They believed that once
people have decided to take insurance out, and decided that they can afford to do so,
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
they are unlikely to be put off by a figure which does not relate to monthly affordability
and which they often take with a pinch of salt on mortgage and loan statements. In any
case, most respondents were more reassured by the transparency suggested by
disclosing the figure than they were put off by being told about the total cost, and
wanted it included.
“This [Option 7] is the best one so far. It‟s straight and to the point. It‟s treating
me as an individual… It‟s not like trying to keep anything back, like swept under the
carpet. It‟s actually being truthful, isn‟t it?”
“It‟s not hiding anything. I‟d actually trust this one.”
Paired depth 2: couple, 40s, C1, term life insurance
However, largely as a result of this thought, most preferred to have the potential benefit
repeated underneath the total premium, to put the latter figure into context and make
the ‘deal’ seem more appealing. This preference seemed more common among women
than men; the latter often thought it unnecessary to repeat information given earlier in
the quote, but they rarely objected to it.
“It brings it home to you what the end result is going to be. You concentrate on
that while you are looking at the sums you are paying out.”
Paired depth 30: friends, 60s, C1, whole-of-life insurance
These views were reflected in the scores given to the two options.
Almost all
respondents, in all sectors, gave the option with the benefit repeated a positive score on
the ‘likelihood of buying’ scale, the reason being that it made the quote seem more
transparent. Moreover, this score was usually the highest they gave to any option on
this basis. The option without the benefit repeated was also often given a positive score,
but this was usually lower, and in some cases it was negative (i.e. they thought it would
put them off insurance to some extent), reflecting the view that the full premium
expressed on its own might seem daunting for some. In the same light, while the two
options in this approach were often respondents’ first and second preferences overall, the
one with the benefit was more often first; the minority of respondents who put the other
version first generally felt the repetition was unnecessary.
Options 4 and 7 as comparators
Views on this option’s value as a cost comparator were mixed. Its chief benefit was its
simplicity – a single figure that could readily be compared. But this was also its main
weakness, for two reasons. First, this simplicity was almost always associated with a
desire to be transparent, so few would think to use it as a comparator. Second, as noted
above, the cost of the policy over the very long term (20 or 30 years) was seen as
irrelevant both to affordability and as an illustration, since the policy might not be held
for the full term. A comparison between two quotes based on this figure might be easy,
therefore, and the format would make any difference in premiums as noticeable as
possible, but it would not be seen as very realistic. This appeared to be the main reason
why some with income protection did not rate this approach so highly – they felt they
were unlikely to hold their policy for that long, so the figure was less relevant.
The comparability scores for these two options tended to be similar – unsurprisingly,
given that the presence or absence of the benefit should make little difference to how the
single figure is compared. They also tended to be similar to, or slightly lower than, the
scores for ‘likelihood of buying’, reflecting respondents’ views that the figure might be
useful as a comparator if this were suggested to them, but that they would probably not
think of this themselves. If anything, therefore, the scores on this scale were probably
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
artificially inflated by the research situation. Thus the main value of this approach was in
the reassurance it gave through providing ‘transparent’ information, rather than its role
as a comparator.
A series of figures – premiums over 1, 5 and 10 years (Options 3, 5 and
6)
This approach involved three variants: one with a repeat of the benefit, one without a
repeat of the benefit, and one with a note about reviewable premiums (Options 3, 5 and
6 respectively). As an approach, this was generally a second preference to options 4 and
7 (the single figure for total premium), and it was usually first choice among whole-of-life
respondents who were not shown the single-figure approach. However, views of the
three variants differed considerably.
Pros and cons of Options 3, 5 and 6
As with the single-figure approach, this was often thought better than no total premium
information at all, on the basis that more is better: it generally scored higher than the
baseline on the overall preference scale. The sums were often seen as a little more
relevant than in the single-figure approach because the timescales were shorter: some
respondents could see how the cost of the policy over a year might influence their
thinking in a way that the cost over 30 years would not. Despite this, however, it was
usually a second preference behind the single-figure option because it was seen as less
succinct and therefore less transparent and easier to ignore.
“It‟s telling you how much you‟re going to pay over one year, five years, or 10
years. So you know how much you‟ve paid out over time. I‟ve never seen that in
an insurance thing, ever.”
“I think it‟s quite sensible. It‟s letting you know exactly what you‟re letting yourself
in for.”
“It makes them sound a bit more trustworthy. They‟re saying: „OK, in 10 years‟
time, this is how much money you‟ll have paid. You will not have paid any more
than that.‟”
Paired depth 14: couple, 50s, B, income protection
As with the single-figure approach, there was a general preference for a repetition of the
benefit, to set the costs into context, although this seemed less strong than in the former
case (partly because the sums were smaller, partly because it was less succinct to start
with and respondents did not want to introduce yet more detail).
The version with a note about reviewable premiums caused widespread confusion and
concern, however. All respondents in this sample had (or thought they had) guaranteedpremium policies, and the idea that the provider could unilaterally change the premium
level worried them greatly. This version was often rejected as a result, although it may
of course be received differently by those who have decided to take a reviewablepremiums policy and understand what this entails.
“That would confuse me and worry me a bit. It‟s a reviewable premium. On their
part or your part?
“That is confusing.”
“It makes you feel like you don‟t have any control here now, you started off with
something and suddenly it might change.”
Paired depth 16: couple, 60s, B, whole-of-life insurance
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Accordingly, the reviewable premiums variant generally scored poorly, with many
respondents in all sectors giving it negative scores on the ‘likelihood of buying’ scale
(although this may not be realistic, as they held guaranteed-premium policies). The
variant without the benefit was generally given low positive scores on this scale, and the
variant with the benefit tended to get higher positive scores (albeit less high than the
equivalent single-figure option (4 and 7), where this was shown).
Options 3, 5 and 6 as comparators
In terms of its use as a cost comparator, the benefits and drawbacks to this approach
were the opposite to those for the single figure. The shorter timescales made the costs
seem a little more relevant, and therefore a little more likely to be seen, as money that
might be spent or saved rather than an illustrative figure. This might make the
difference in costs seem more realistic and relevant, and encourage people to look at
how much they might save if they chose one policy instead of another. But the amount
of information made the figures less stark, and therefore less likely to be set alongside
one another, than in the single-figure option.
Scores on this scale for the variants with and without the repeated benefit were similar to
those for the single-figure approach, although they were more often lower than higher.
The reviewable-premiums variant often scored very poorly, however, as respondents
wondered how they could rely on predictions about future premiums if these were liable
to change.
A further point about repeating the benefit is worth making at this stage. In their overall
preferences, some respondents made the repeated-benefit variants of the single-figure
and series of figures approaches their first two preferences overall – with the two nobenefit variants placed lower. This pattern was mirrored in the ‘likelihood of buying’
scores. It suggests that repeating the premium can have an influence on responses that
is strong enough to overcome preferences between the overall approaches, and is a
further argument for including this information.
The calculation (Option 2)
Pros and cons of Option 2
This approach was widely rejected (most put it among their bottom three choices
overall), but it was liked by a few respondents. Those few who liked it appreciated the
flexibility of the approach: it suggested to them that they might want to calculate the
total premium, which they had not previously considered doing but thought a good idea
when prompted, and allowed them to do so across any number of years they liked.
These respondents tended to be in the whole-of-life sector: they were in their 60s and
70s, and overall, as noted above, it seemed that older respondents were generally more
interested in the idea of a total premium than younger people.
“I think that‟s a good idea. It enables people, if they are by themselves and they
can‟t do it themselves, then they‟ve actually got something there that they can play
around with and try and do and then take it along to somebody and say here look
what do you make this to be?”
Paired depth 16: couple, 60s, B, whole-of-life insurance
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They were, however, in a small minority: most disliked this approach for three reasons.
First, those who had not thought of calculating the long-term cost of their policy for
themselves generally wanted to be told what the figure would be, not to be told to work
it out for themselves. Second, those who were happy to work it out were insulted to be
told how to do such a simple calculation. In fact, even those who did not want to
calculate it were insulted by the suggestion that they would not be able work out how to
do so for themselves should they want to. This approach clearly faces a Catch-22
situation: it tries to suggest to people that they might do the calculation themselves, on
the assumption that they would not think to do this; but the calculation is so simple that
setting it out comes across as patronising.
“What is the point of simplifying something by showing you an example that makes
it even more complicated. That looks more complicated.”
“It wouldn‟t take much to put the exact price in, anyway.”
Paired depth 28: friends, 40s, C1, income protection
A third reason for disliking this approach was the inclusion of a generic example. Far
from clarifying the calculation (which was thought simple enough anyway), using figures
which bore no relation to those in the main quote was confusing and risked giving
respondents who did not read the text properly the wrong idea about their own total
premium.
“I would rather know [the real amount] because here you‟re seeing an example of
£20 a month, but you‟re not paying £20 a month, you‟re paying £14.10.
So I
would want to know the relevant figures for me, if it‟s an example.”
Paired depth 14: couple, 50s, B, income protection
The scores given to this approach fluctuated considerably, reflecting the variety of
reactions to it. Those who found it patronising tended to give it a high negative score on
the ‘likelihood of buying’ scale, apparently more because it irritated them than because it
really put them off the idea of insurance. Others gave it 0, 1 or -1, indicating no strong
feeling either way – they would not have paid much attention to it in real life. One or
two (all whole-of-lifers) gave it a high positive score because they liked the feeling of
flexibility it offered.
Option 2 as a comparator
The approach was not thought particularly useful as a comparator because the figures for
comparison were not immediately available: if respondents were unlikely to use obvious
figures to compare costs, they were certain they would not take the trouble to choose a
timescale and perform two calculations before doing so. A few in all sectors gave it a low
positive score on the comparability scale, probably reflecting the general view that more
information is better than less. Others felt it would make no difference (and gave it a 0).
But a number felt the example was likely to be problematic in this context as well: either
both quotes would use the same ‘official’ figures, in which case the results would be the
same and there would be nothing to compare; or they would use different, arbitrary
figures which might confuse a comparison between the true costs. They gave the
approach high negative scores on this scale.
“It means nothing because the example doesn‟t correspond with your own figures.”
Paired depth 28: friends, 40s, C1, income protection
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Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
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The telephone number (Option 1)
Pros and cons of Option 1
The idea of telephoning to find out what the total premium would be was also widely
rejected, generally coming among respondents’ last three preferences; it also lacked the
sporadic support enjoyed by the calculation approach. In part this was for the same
reason as above: respondents felt it was patronising to suggest that they could not work
out the total premium for themselves. They certainly did not want to go to the trouble of
telephoning to find out – especially as they thought they would probably be ‘sold’
something if they were to call.
“Stupid. It is almost saying: 'If you are too thick to multiply this give us a call and
we'll do it for you.‟”
“You'd be embarrassed.”
Paired depth 11: couple, 30s, B, income protection
“I'd like to think not. I would rather not invite – you know what these salesmen are
like. You won't get away. I would rather work it out for myself.”
Paired depth 30: friends, 60s, C1, whole-of-life insurance
But the dislike of a number of respondents went further than this: they were suspicious
that such a simple operation should apparently require a telephone call, and made to feel
that something was being concealed from them and the concept of total premium was
not as simple as they had thought. The effect of this on their perceptions of insurance
was the opposite to that of a simple declaration of total cost: the provider seemed less
open and transparent than if nothing had been said, and their suspicions were raised. To
reflect this, the approach was generally given a negative score (often a high one) on the
‘likelihood of buying’ scale.
“It is such a simple calculation. You think: 'Why are they hiding that from me?‟”
“That is not beyond the comprehension of most people. Is there some tax added
on?”
Paired depth 11: couple, 30s, B, income protection
Option 1 as a comparator
This approach was thought to have little value as a cost comparator: there were no
figures to compare, and no respondent thought they would call up to access them. At
best, it might suggest to some that they do the calculations for themselves, and then
compare figures; but this seemed very unlikely to these respondents. At worst, though,
the sense that something was being hidden was expected by some respondents to make
a comparison between monthly premiums more difficult, if it suggested that not all the
information about the policies was to hand. Thus most respondents gave the approach a
0 or a negative score on this scale.
Author: Ben Toombs, Director, Cragg Ross Dawson
Any queries about this report should be directed to the author at [email protected],
telephone +44 (0)20 7437 8945. Alternatively, queries about this report or other
information available from the ABI can be directed to the Research Helpdesk at
[email protected], telephone +44 (0)20 7216 7390.
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© Association of British Insurers 2009
Appendix 1
ABI083
Discussion Guide – disclosures first
August 2009
Introduction and warm-up
names, ages, family, occupations, interests etc
Overall views of insurance (briefly)
which types of insurance do they own; why do they have these; do they
think they are worthwhile
how do they feel about insurance generally – how useful, important, value
for money, significant to them etc is it; how does it compare with other
financial products
how easy is insurance to understand; what do they feel they need to know
about their products; how confident are they
that they know this; how does this compare with other financial products
Choosing a product (briefly)
what is important when choosing an insurance product – what do they take
into account, what seems too complicated,
what seems irrelevant to them, what is less of a priority for them
how do they go about choosing a product – how do they research the
market, what advice do they take, how do they shortlist products, how
long do they spend on all this
do they generally feel confident that they have access to the information
they need to make a good decision; how does this compare with other
financial products
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Assessment of the relevant disclosures
EXPLAIN THAT YOU ARE GOING TO SHOW SOME VERSIONS OF AN INSURANCE QUOTATION WITH A VIEW TO
FINDING OUT WHICH SEEMS MOST USEFUL AND EASY TO USE.
USE THE DISCLOSURE PACK WHICH RELATES TO THE RESPONDENTS’ PRIMARY PRODUCT
– TERM/MORTGAGE
LIFE INSURANCE, INCOME PROTECTION OR WHOLE-OF-LIFE INSURANCE.
ROTATE THE ORDER IN WHICH THE DISCLOSURES ARE SHOWN ACROSS THE INTERVIEWS.
BASELINE DISCLOSURE IN THIS, WITHOUT EXPLAINING THAT IT IS THE BASELINE.
INCLUDE THE
NEVER START WITH THE
BASELINE.
FOR THE FIRST DISCLOSURE, EXPLORE
(UNPROMPTED) STANDOUT OF TOTAL PREMIUM INFORMATION – THIS
WILL BE LESS REALISTIC FOR SUBSEQUENT DISCLOSURES.
which elements of the quote stand out as being most obvious and useful;
what would they look at first
which pieces of information would be most useful to them in deciding
whether or not to purchase this policy
(prompt if not already raised) how significant does the total premium
information seem; how much attention would they pay to it; how useful
does it look; how easy is it to understand
EXPLAIN THE TOTAL PREMIUM CONCEPT IF NECESSARY.
SHOW THE ALTERNATIVE QUOTE FOR THE FIRST DISCLOSURE.
which pieces of information would be most useful to them if they wanted to
choose between these two quotes; which quote would they choose and
why
how does the total premium information as expressed here make them feel
– does it affect their views of the policy at all
SHOW THE REMAINING PAIRS OF DISCLOSURES
ABOVE TWO EXPLORATION POINTS.
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(INCLUDING THE BASELINE), REPEATING THE
Disclosure of ’total premium’ for pure protection contracts – Cragg Ross Dawson
© Association of British Insurers 2009
Preferences and ratings
ASK RESPONDENTS TO PUT THE DISCLOSURES (INCLUDING THE BASELINE) INTO AN ORDER OF PREFERENCE
BASED ON…
STANDOUT OF THE TOTAL DISCLOSURE INFORMATION
EASE OF COMPARING ALTERNATIVE QUOTES
DISCUSS THE REASONS FOR THIS ORDER OF PREFERENCE, AND RECORD IT.
EXPLAIN THAT THE BASELINE IS THE CURRENT FORM OF DISCLOSURE, AND WE ARE INTERESTED IN
COMPARING THE OTHER OPTION WITH IT.
does the baseline seem more or less useful/helpful than the other options;
would they find it easier or harder to choose a policy with this level of
information
does the baseline make them feel any different about the product – listen
for, but do not prompt on, effect of seeing the total figure
-5 / +5 SCALE TO RESPONDENTS: BASELINE IS SET AT 0; - SCORES ARE WORSE THAN THE
+ SCORES ARE BETTER. ASK RESPONDENTS TO RATE EACH DISCLOSURE OPTION ON THIS SCALE
TWICE, WITH REFERENCE TO…
SHOW THE
BASELINE;
WHETHER THEY WOULD BE MORE OR LESS LIKELY TO BUY THIS TYPE OF INSURANCE AT ALL
HOW USEFUL THE INFORMATION IS WHEN COMPARING ALTERNATIVE QUOTES FOR THE
SAME PRODUCT
DISCUSS THE REASONS FOR THESE SCORES, AND RECORD THEM.
Perceptions of premiums
how do they think about the premiums they will owe – amount per month,
per year, over the life of the policy etc
on what basis do they compare products – cost per month, per year, over
the whole term etc
do they consider how much the product will cost in the long term; are they
aware of the concept of a ‘total premium’ or ‘lifetime cost’
if they are aware, how does this inform their decision making, their
attitudes to products and the industry
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if they are not aware, why do they think this is and do they think they
should be aware of it
Value of a total premium disclosure
would the total premium be useful – how would they use it, would it affect
their decisions in any way
what would a total premium disclosure allow them to do that they could
not otherwise
listen for, and probe if arising…
-
is there any chance that it would put them off the product – is it
perhaps more palatable or easier to think in terms of a monthly or
annual cost instead
-
would knowing the total premium make them more or less likely to
buy insurance at all (as opposed to choosing one product over
another)
can they think of any other products which give a total premium
if so, do they pay attention to this and how does it make them feel; if not,
prompt on mortgage quotations
how would they balance the total premium against the potential rewards of
the policy – how clearly does this need to be spelled out if it is an issue
Summing up
how important do they think the issue of total premium disclosure is
would they think of working it out on their own, if not prompted to do so; do
they think they would be able to do this
which of the disclosure options most effectively meets their needs
what is good and bad about each
how could the best be improved, to meet their needs even more effectively
THANK AND CLOSE.
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