Direct insurance offers many perceived benefits, including ease of application, quick acceptance, low cost and the opportunity for customers to “self service” by conducting their own insurance research. These benefits are resonating with customers as shown by the rapid growth of this product range – the number of direct life insurance products has increased from 109 in 2008 to 203 today, an increase of 86% in the last 4 years. Sales in 2011 alone were $279.2 million (Rice Warner Actuaries, Direct Life Insurance Report 2012, page 5).
This article will focus on direct insurance policies and the “tips and traps” of these plans including:
- What is direct life insurance and what are the different types of policies offered?
- What are the advantages of direct insurance policies?
- What are the limitations of direct insurance policies?
How do they compare to an insurance policy offered by an adviser?
What is direct insurance and what are the different types of policies offered?
Direct life insurance products are defined in this article as those products designed to be purchased directly – without using the services of an intermediary or an adviser. There is also likely to be no face –to-face interaction between the customer and a representative of the distributor or insurer.
The sales process for direct insurance policies is typically initiated trough a variety of means:
- Over the telephone (inbound or outbound calls)
- Online via websites
- Direct mail to customers
- Advertisements in televisions, newspapers, magazines or radio
- Available directly through bank branches