By Tom Murray, Head of Product Strategy LifePlus Soltions, Majesco
This may seem like a shocked reaction to the sudden and sharp increase in day to day living costs. But the ONS found that nearly one in 5 people were borrowing more money or increasing their credit lines in the last month, which would seem to indicate that a lot more people were finding it difficult to make ends meet. When people are in that situation, plans to save for the future are the first thing to be abandoned.
And it’s not just those on lower incomes that are finding things tough. A recent survey by Hargreaves Landsdown revealed that the higher the income level of those surveyed, the more debt they had. Higher income earners are twice as likely to have variable rate debt, the type of debt that will increase rapidly as interest rates rise to fight inflation. Many are going to find that their high income doesn’t protect them as much as they thought from the effects of the current economic downturn.
Even if the downturn turns out to be less severe than current forecasts, it is going to be difficult to get people to embark on savings and investment plans when they are worried about their ability to meet financial commitments. This is where product design is going to be crucial.
Investment products that allow people to adjust their contributions as their income varies are a far more attractive option for people concerned about their income levels remaining consistent over the short-term future. People need to be confident that they can reduce their monthly contributions easily and raise them again when their situation improves. Without that level of flexibility, they will be nervous of making major financial commitments.
Many of the existing products in the market are insufficiently agile to be altered to reflect the dynamically changing circumstances of the consumer. And even where they are, the flexibility can be constrained by rigid administration systems that don’t permit the consumer to rapidly make the changes they need to suit their changing circumstances.
Investment products need to be designed with this level of flexibility at their core. And the infrastructure to support them needs to allow the customer to feel in control of their finances. Consumer portals that allow them access to their financial products and to make adjustments easily give them the level of control they need to make that commitment. After all, if the product allows policyholders to decide to decrease their premium immediately but the insurer doesn’t have an accessible portal to enable the consumer to sign on and implement it immediately, the product flexibility isn’t much use.
Investment products for this higher inflationary age need to have features and supporting processes designed to respond rapidly to the consumer’s needs: the only way to achieve this is with a digital first approach. This means designing products and services by thinking about how to deliver them both in a digital way. Alternatives for consumers who wish to deal with the provider in a more traditional manner can be added on, but the default position has to be focused on digital interaction as the primary means of communication between the insurer and the customer. This will give consumers a level of control over their spending that will be essential if they are to feel comfortable taking out new investment opportunities.
Without flexibility, providers of investment products are going to face an uphill battle to sell new business over the next few years. Success is not just going to come from providing good value; it is going to be equally important to have the product flexibility and service levels that give consumers a sense of financial control in a more unpredictable world.
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