June 20, 2019
Our Chief Commercial Officer, Andy James, talks to Insurance Post about the importance of trust in the insurance industry.
Public trust is the fundamental element underpinning the prosperity of the insurance industry. In a market built on assuring customers that we’ll be there should the worst happen, trustworthiness sits at the heart of delivering confidence to ensure advocacy, and increased likelihood of long-term policyholders.
Before Citizens Advice launched a super-complaint to the CMA into the loyalty penalty in September 2018, motor insurance industry already had a poor reputation. The publication of the super-complaint pushes on an open door and reinforces the opinion that the motor insurance industry punishes loyalty, impacting and eroding the intersect between consumer trust, reputation and customer retention.
The publication of the regulator response on tackling the loyalty penalty this summer will help address this issue, and our industry’s broader reputation problem. Outside of this impending regulatory change, there are two steps individual insurers can take to improve their own customers’ trust, ultimately helping boost our industry’s reputation.
Demonstrating value
Currently, consumers understand the value of insurance purely on cost, with aggregator sites encouraging them to choose their policy based on price. Yet their expectations of customer service are coloured by experiences with higher-touch transactions like retail and banking, which we trail behind on in terms of customer service. Insurers have invested in back-end capability allowing micro-segmentations and individual pricing, but have not followed suit in front-end customer interface capabilities. We’re good at understanding the business we want, but not how to engage and retain, reinforcing churn at renewal when expectations haven’t been met.
Insurers can overcome this by ensuring that any seemingly inconsequential interaction, like a change of address or query over policy details, is handled immaculately. Excellent customer service demonstrates that the peace of mind consumers expect from their policy extends to the day-to-day handling of their account, improving trust, retention and, by proxy, reputation.
Transparency and education
The loyalty penalty has shown us the importance of transparency in consumer perception of the insurance industry. Insurance is not only seen by many as a grudge purchase – it’s also a product that many consumers, happily, don’t have to use. Claims frequency in motor insurance runs at around 15%, meaning 85% of consumers won’t claim on their policy in a year. As a result, a great deal of our customers will not experience the product they’ve paid for, and don’t see the value. Insurers must, therefore, clearly communicate the details of their products and policies, and how they support those customers who do need to use them.
Furthermore, there is a lack of consumer understanding around how the insurance business model works, that a great deal of the cost of a premium goes into paying for very large claims from other motorists for life-changing injuries – and not into lining the pockets of insurance companies.
Understanding where the money goes through better communication and greater transparency must be a part of addressing the reputation issue.
Ultimately, trust runs both ways. Lexis Nexis research recently revealed that 43% of motorists are comfortable with omitting or adjusting data to keep premiums low. Arguably the perception that insurers are ‘fleecing’ their customers has created an environment in which this behaviour feels acceptable to consumers. Reducing such fraud, and improving customer retention, is contingent not just on addressing broader industry issues, but rebuilding trust from the ground up - starting with transparency in, and quality of our customer relationships. Reputation is earned and it takes time, providing a clear customer promise and delivering on it is our industry’s key first step.
Public trust is the fundamental element underpinning the prosperity of the insurance industry. In a market built on assuring customers that we’ll be there should the worst happen, trustworthiness sits at the heart of delivering confidence to ensure advocacy, and increased likelihood of long-term policyholders.
Before Citizens Advice launched a super-complaint to the CMA into the loyalty penalty in September 2018, motor insurance industry already had a poor reputation. The publication of the super-complaint pushes on an open door and reinforces the opinion that the motor insurance industry punishes loyalty, impacting and eroding the intersect between consumer trust, reputation and customer retention.
The publication of the regulator response on tackling the loyalty penalty this summer will help address this issue, and our industry’s broader reputation problem. Outside of this impending regulatory change, there are two steps individual insurers can take to improve their own customers’ trust, ultimately helping boost our industry’s reputation.
Demonstrating value
Currently, consumers understand the value of insurance purely on cost, with aggregator sites encouraging them to choose their policy based on price. Yet their expectations of customer service are coloured by experiences with higher-touch transactions like retail and banking, which we trail behind on in terms of customer service. Insurers have invested in back-end capability allowing micro-segmentations and individual pricing, but have not followed suit in front-end customer interface capabilities. We’re good at understanding the business we want, but not how to engage and retain, reinforcing churn at renewal when expectations haven’t been met.
Insurers can overcome this by ensuring that any seemingly inconsequential interaction, like a change of address or query over policy details, is handled immaculately. Excellent customer service demonstrates that the peace of mind consumers expect from their policy extends to the day-to-day handling of their account, improving trust, retention and, by proxy, reputation.
Transparency and education
The loyalty penalty has shown us the importance of transparency in consumer perception of the insurance industry. Insurance is not only seen by many as a grudge purchase – it’s also a product that many consumers, happily, don’t have to use. Claims frequency in motor insurance runs at around 15%, meaning 85% of consumers won’t claim on their policy in a year. As a result, a great deal of our customers will not experience the product they’ve paid for, and don’t see the value. Insurers must, therefore, clearly communicate the details of their products and policies, and how they support those customers who do need to use them.
Furthermore, there is a lack of consumer understanding around how the insurance business model works, that a great deal of the cost of a premium goes into paying for very large claims from other motorists for life-changing injuries – and not into lining the pockets of insurance companies.
Understanding where the money goes through better communication and greater transparency must be a part of addressing the reputation issue.
Ultimately, trust runs both ways. Lexis Nexis research recently revealed that 43% of motorists are comfortable with omitting or adjusting data to keep premiums low. Arguably the perception that insurers are ‘fleecing’ their customers has created an environment in which this behaviour feels acceptable to consumers. Reducing such fraud, and improving customer retention, is contingent not just on addressing broader industry issues, but rebuilding trust from the ground up - starting with transparency in, and quality of our customer relationships. Reputation is earned and it takes time, providing a clear customer promise and delivering on it is our industry’s key first step.