Dr Kay Swinburne, Vice Chair of Financial Services at KPMG, offers a thought-provoking perspective on the relationship between customers and insurers ahead of a panel on strategic and reputational challenges for the industry at the ABI’s Annual Conference.
Trust and confidence have always been key components of a positive relationship between insurers and their customers. By definition, insurance products are centred on trust. Policyholders are expected to only make valid claims and, when they do, their insurers are expected to offer the financial protection promised.
Over the years issues like dual pricing have damaged that trusted relationship between insurers and consumers. Last year, in particular, the industry suffered a number of reputational blows that came from a failure to make good on those promises.
While 2020 offered unprecedented challenges that arguably required judiciary review, we can all agree that months of uncertainty and a supreme court case is not an average, or acceptable, customer claims journey. This situation has reinforced that a lack of trust in the insurance industry likely stems from an expectation gap between insurers and their customers.
That insurers continuously fail to live up to consumer expectations suggests a lack of understanding around policies; including what insurers are actually selling, what their customers are covered for and how their premiums are calculated.
Fairer practices have been a dominant theme on the regulatory agenda for a number of years now, particularly around fairer pricing. While recent changes to pricing practices will hopefully renew that trust to a degree, a likely cause of this expectation gap is also ineffective communication. If insurers are to rebuild the confidence of their customers, this is something that must be addressed.
Even the briefest look at policy wordings exemplifies this. Recent figures from KPMG reveal that commercial insurance policy documents can take between two and three hours for an average adult to read through. While small business owners require a different product suite, their personal needs as readers are near identical to individual consumer customers. Despite this, highly complex commercial documents can take up to six times longer to get through than more customer-centric personal lines documents.
While long sentences and formal language might be beneficial for lawyers, for many, reading a policy is where the relationship with their insurer starts. Simplicity here will help bridge that customer expectation gap and contribute to the industry’s goal of rebuilding trust by helping customers better understand the products they’re buying.
Tackling accessibility issues, like overly complex policy documents, won’t be enough to regain the trust and confidence of consumers alone. It must be said that while the COVID-19 business interruption test case has led many to question whether insurance is meeting the needs of customers and society, it has provided a dramatic opportunity for learning.
Many insurers are taking bold steps towards transforming their ways of working as well as refocussing their organisations on the ESG (Environmental, Social, and Corporate Governance) agenda. Tackling the social elements of this will be incredibly important in the months to come, and while the learning process has been painful, insurers are slowly becoming equipped with the best tools to complete this journey.