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Guest Blog | Delivering fair value: An opportunity for the insurance and long-term savings industry

Guest blog from José Morago, Advisor to Huntswood for Risk and Regulation

Delivering value to customers is vital, but to do it right is to recognise it is about more than just the cost and design of insurance products – it’s about supporting customers at every part of the journey. This is particularly important given the current landscape, not only because regulation is driving a focus on fair value but because, in a new post-pandemic environment, our needs are likely to have changed dramatically. For customers who need it, having an insurance provider they can trust and rely on is paramount.

The insurance industry plays a significant role in protecting people and businesses in vulnerable moments, for example in the event of a car accident or house fire. In these situations delivering value to customers is vital, but to do it right is to recognise it is about more than just the cost and design of insurance products – it’s about supporting customers at every part of the journey.

For customers, having an insurance and long-term savings provider they can trust and rely on is paramount.

Similarly, in the long-term savings space, providers are helping customers save for retirement and seeking to guide customers so that they can make the right decisions to optimise their retirement. This is particularly important given the current landscape, not only because regulation is driving a focus on fair value but because, in a new post-pandemic environment, our needs are likely to have changed dramatically. For customers, having an insurance and long-term savings provider they can trust and rely on is paramount.

Fair value has become an area of focus for the Financial Conduct Authority (FCA), having found that 6 million policyholders were paying high or very high margins in 2018 – mainly due to “harmful pricing practices” in the home and motor insurance market. This was on top of the Citizens Advice 2018 super-complaint submitted to the Competition and Markets Authority, which revealed that people who renewed their policy over five years paid, on average, a loyalty penalty of 70%.

Recognising the need to address fairness and value across the sector, and building on initiatives already taken by the industry to address this, the regulator is introducing significant reform for general insurance firms. New proposals will mean that insurers cannot charge renewing customers more than new customers in future and put an end to the high prices paid by some long-standing customers. In addition, new requirements around ‘fair value’ assessments, product governance and transparency in the distribution chain will also apply across all retail GI and commercial products. Far from a mere set of compliance rules, the new proposals will require firms to make significant operational and business-wide changes to both their pricing and distribution practices as well as their internal processes.

In the pensions space, the FCA is due to issue its long awaited final rules on Value for Money in Pensions with the expectation that Independent Governance Committees will be required to give quality of service and investment performance equal consideration to that of annual costs and charges. For providers, it is clear that any consideration of value for money should go even further to include a range of factors including future-proofing solutions, application of ESG to investments and customer communications.

For now, aligning with the FCA’s policy changes will be front of mind for firms but they are also an opportunity for broader, positive change – particularly when it comes to demonstrating value to customers. Historically, articulating the real value of insurance and long-terms savings has been a significant challenge for the industry and therefore the forthcoming changes offer an opportunity to improve customer confidence and trust going forward.

So how can insurers and long-term savings providers do this? The good news is there is plenty of scope to stand out and stand up for customer value and it begins with assessing the customer journey. Beyond pricing, costs and charges and distribution, claims and complaints are good examples of where the greatest changes can be made when it comes to delivering ongoing value to customers.

All of this means putting customers and their needs at the centre of decision-making

All of this means putting customers and their needs at the centre of decision-making and finding the right balance between the cost and quality of products and the value driven by customer service. Whether a customer is taking out a new policy, using it or cancelling it, engaging with their pension for the first time, or thinking about retiring, at each point the customer needs to be supported and communicated with in a timely, open, and honest way. With this in mind, it is important that insurance and pensions providers invest in their communication with customers and have the right resource, processes, systems, and skills in place to support customers and meet their needs.

On Thursday 10th June, I’ll be one of the keynote speakers at the ABI’s virtual webinar Exploring the regulatory expectations on the value of insurance and long-term savings products’ and will focus on how insurance firms and pension providers can deliver value throughout the entire customer journey and turn some of the challenges outlined above into opportunities for long term loyalty and advocacy. 

The session will cover:

  • How insurers can provide value to their customers throughout the customer journey
  • The outcomes insurers can create by providing value to customers
  • How insurers are already demonstrating this, what’s working well and how they’re overcoming challenges

 The webinar will also feature speakers from the Financial Conduct Authority, Bupa Insurance, Phoenix Group and Fairer Finance and will be chaired by the ABI’s Director of Regulation, Charlotte Clark.

For more information on the event and to register, click here.

José, Advisor to Huntswood for Risk and Regulation, is a seasoned risk management professional with 25+ years C-Suite and executive leadership experience in insurance and banking at an international level. As former CRO and regulator, José has deep knowledge and experience of risk and regulatory challenges across the financial sector, including recent assignments on topics around product governance, risk management effectiveness and new regulatory requirements related to climate change and operational resilience. Before setting his advisory business, José spent three years at the FCA as Deputy Chief Risk Officer. He also held senior roles as Group Risk Director at Aviva and Chief Risk Officer for Ageas UK as well as McKinsey, Moody’s and Metro Bank. José is also former Chair of the Institute of Risk Management (IRM) and Internal Model Industry Forum (IMIF). In 2016, he was named as one of the most influential risk and capital professionals in Europe by lnsuranceERM magazine.


Last updated 25/05/2021