What’s the first reaction we get from people when they see Indie's Wealth Bonus? It’s disbelief, and general skepticism. We’ve even struggled to convince people inside Indie that it’s possible to give a Wealth Bonus, while at the same time keeping our premiums better than our competitors’. Note: we aren’t cheaper than absolutely everyone, but that’s because we charge the right price (as you’ll discover below).
So this is how we do it
First, you’ll need to understand how your premium is normally used by insurers. Broadly speaking, and depending on the exact product, about 60% of your premium is used to pay claims. This number can sometimes be higher, and often much lower (i.e. funeral cover… but that’s a subject all on its own).
Where does the other 40% go?
Well, some of it is a profit margin (give or take 5%), some is for operational expenses (roughly another 5%) and the vast majority is for distribution (let’s call it 30% of your premium). A chunk of that 30% covers commission paid to the financial advisor who has assisted you with your financial planning, but there is still a lot of money spent on the activity of distribution itself.
So why’s it so expensive to distribute insurance?
Well, it’s simple really. Nobody likes to think about their mortality, and many don’t recognise they actually need insurance. So when it comes to choosing between spending on something that gives you instant gratification, or insurance… insurance often loses. It’s very expensive to distribute something to people who don’t want it. The more people want something, and the more often they seek out what you’re selling, the cheaper it is to sell.
This is why people often say that insurance is sold, not bought
So, with this in mind, our theory is that if we can get people to want Indie insurance more than conventional insurance, then our distribution cost can be substantially lowered, which means we can afford to lower our premiums and do some pretty cool stuff.
So, we created the Wealth Bonus — which is pretty awesome (even if we say so ourselves), but does cost us a little. But we believe that because we have the Wealth Bonus, our distribution costs will be much lower (because the Wealth Bonus is something people want), which will not only easily pay for the Wealth Bonus itself, but also means we can lower our premium.
Without wanting to complicate things here, we’ve also done some very clever things which have allowed us to lower the 60% normally spent on the cost of claims. This includes introducing new rating factors, pricing on a continuous basis, and reducing fraudulent behaviour which is prevalent in insurance.