How the FCA’s recent general insurance research can be turned into a net positive for the insurance sector
Last week, the FCA released research into the pricing of home and motor insurance.
The story stole headlines, with coverage across national media. The research did not paint a positive picture for our profession: 6 million policyholders overpaying, an excess cost of £1.2bn in premiums, and a third of affected customers being elderly or otherwise vulnerable. The FCA has promised to undertake a range of activities to address the problems it had identified, and consequently some big changes to the general insurance industry could be on the horizon.
Of course, the reality of the insurance business, as is the case with the telecoms and utilities businesses, is that there will always be an element of customer inertia. Insurance is something many customers think about only when purchasing and making a claim. Though this inertia is to be expected, it is not an excuse for similar inaction on the part of insurance suppliers. Our profession could and should be doing more to shake customers out of their disengagement. The only way to effectively achieve this is through improving customer awareness and creating more trust between supplier and customer.
Dave Ross, commercial director for CPP Group UK
The continuing journey towards building greater levels of public trust will require businesses to examine more closely their responsibilities towards those who buy their products. The regulator’s report should leave none of us in doubt that insurance providers have a responsibility to remove barriers to switching suppliers, educate customers and be more transparent. The debate on whether or not auto renewal is in the customers’ best interests and the pricing practices which surround some who use this approach will almost certainly take centre stage over the coming weeks and months.
With regards to vulnerable customers, the industry has been making moves in the right direction over recent years. Firms have been recognising a far wider spectrum of what constitutes vulnerability, and the FCA itself has been broadening the sector’s focus. The progress made by these positive steps must be continued as we continue to learn from our customers, educate ourselves as to the range of vulnerabilities they might face, and understand the ways we can best alter our business models, product designs and service delivery to cater to their specific needs.
While the FCA is making its position clear, it should be noted that we remain in consultation mode. Firms continue to be invited to work with them to effect positive change in the sector. Perhaps this represents an opportunity for a number of market elements to come together and work collaboratively to ensure the industry changes in a way that benefits everyone. The research shows a need for renewed public trust and engagement. The excellent work which has been started (and continues to be progressed) by The Chartered Insurance Institute (CII) using enhanced professionalism to build public trust in insurance provides an excellent foundation. A co-ordinated approach between the industry’s professional bodies, the regulators, and a wide variety of insurance businesses working together on addressing the observations could be an exciting prospect.
There is a chance to help shape the industry’s future, and to put customer relations at the centre of it, increasing transparency and making insurance a less intimidating prospect for many people. Any industry making an effort to reach out to its customers, making them educated and aware, is always going to be a good thing. The only way this can be achieved is if businesses from across the world of insurance work with regulators and organisations to move forward in a cohesive fashion.
As the broker market is increasingly threatened by commoditisation, and regulators increasingly focus on transparency in business, there is an opportunity for proactive brokers and intermediaries to remind customers (and perhaps even themselves!) about the value that they can bring to the customer engagement process. The role of the broker / intermediary as “trusted adviser” has never been more relevant. The opportunity is there to reposition themselves in the market by going beyond a role as one that begins and ends with the sale of a policy, to that of professional adviser who dispenses advice and adds genuine value to their offerings, creating strong bonds with their customers and engendering trust and loyalty in the process. Such relationships are a far cry from those described by the FCA report, and are undoubtedly more attractive to customers.
At CPP Group UK, we work with brokers and partners to provide them with the guidance and product suites necessary to allow them to add value, build customer relations and loyalty, and make themselves an invaluable part of the ongoing customer relationship. We strive to learn from regulatory findings and guidance, partnering with others to work in response to it, making the world of insurance one that is truly beneficial for customers and businesses alike. To find out more about how we can work with your business, whatever its size and specialism, get in touch at firstname.lastname@example.org.