Ensuring a solid financial foundation for kids at Unum 10 May 2022 192
Borys Kowalski, Board Member and Chief Actuary at Unum Insurance, describes their unique life insurance product for kids that gives parents peace of mind.
Unum has introduced a new insurance policy called “Better Start”: it is a child endowment product with an additional waiver or premium. Should the guardian pass away or become disabled, the insurer will start paying the premiums to ensure continuity of coverage and safeguard the capital for the child. Better Start also gives the child an opportunity to continue their insurance coverage under a new life insurance contract, which can be concluded without evidence of insurability.
How would you describe Better Start? Is it a savings product? A life insurance?
Better Start is an endowment type life insurance product which is a mix of savings (guaranteed) and protection life insurance. It assures parents (or other policyholders) with the guarantee of capital saved for the kid for his or her start in adulthood. Parents purchasing the product can have peace of mind that whatever happens to them, their child will be supported with the lump sum amount at maturity (with premiums waived in case of policyholder death or inability to pay premium due to health reasons). The insured child is also covered with the life insurance covering total disability, terminal illness, and death. This product offers guaranteed amounts with upside potential and includes inflation protection.
With this policy, the benefit is payable to the person insured when they start their adult life. Does the product expire at that time or is there a way for the young adult to extend the contract? How exactly does this work?
The benefit is payable to the person insured at the end of contract (which is for 15, 20, or 25 years) or before contract maturity. Once the contract expires, the young adult can extend the insurance coverage with guaranteed insurability (without examining and underwriting).
How has Better Start been received by consumers? What are the early results?
It is too early too early to say about the reception since we have only just started offering the product. We know that it's needed on the market and are aware parents are open to such solutions. However, the overall market awareness of insurance for kids (especially in the low interest environment) is based more on accident policies than savings/protection. This type of product makes up only 1% of whole GWP in the life insurance division.
We talk a lot about successes but we also know that failures are very rich in lessons. What advice would you give to someone who is just starting to create a similar product? What mistakes have you made or almost made? What are the pitfalls to avoid?
When developing a new product, you should define your target market and the value proposition. Decisions must be made based on the best information about external and internal environments such as: target market, distribution channels, competition, rules and regulation. It is important to find the right balance between different expectations of distributors, clients, and company’s objectives. These expectations should be verified on every stage of designing the product. Failure to do so may result in delivering a product which does not meet the expectations of your target market. It is important to note that the product itself is just a part of the offer. It has to be safe for customers, should be offered to address their individual needs, their plans for future, and viewed through the lens of an insurable interest and affordability.
What other products do you offer for children and families?
We are offering child health coverage which includes critical illness, hospitalization, complete disabilities, surgery, and it is part of the life insurance package for the parent. Our offer includes protection products as a whole life insurance with cash value (for parent or kid), term life insurance, family income term insurance, and product addressing the retirement need.
To learn more about financial institutions' offerings for kids, visit our FS Innovation Radar and download the report "Generation next"