Sam Barrett reports on the insurance profession’s efforts to ensure consumers understand their policies
Claims are a critical part of the insurance proposition, with a good experience fundamental to winning public trust. But with research by GoCompare finding that understanding of insurance terminology is low, the potential for unexpected shocks during the claims process means insurers’ reputations are on the line.
The research, which was conducted among more than 2,000 people in January 2021, found that only 28% of motorists check their excess levels when taking out a motor insurance policy, with 36% of motorists selecting their cover solely on price.
Comprehension was particularly low among younger drivers, with just 18% of 18 to 34-year-olds saying they fully understood excesses, compared to 47% of all respondents.
This lack of understanding is affecting the claims experience. Among those who made a claim, 12% said they did not know they had to pay an excess, 13% that the excess was more than they expected, and a further 7% said it came as a nasty shock.
Ryan Fulthorpe, car insurance spokesperson at GoCompare, says it is essential that the sector helps consumers understand exactly what they are buying. “Nobody wants to see policyholders having to pay an excess they were not expecting, especially when finances are under pressure as a result of the cost of living crisis,” he explains.
“Yes, a higher voluntary excess will bring down the premium but the insurance industry has a responsibility to ensure customers understand the implications of this.”
Rising to the challenge
This exercise is not without its challenges. Consumer engagement with insurance is relatively low, with most policyholders keeping any interaction down to the annual renewal. Additionally, for many people, it’s not the most interesting of topics.
Given this, the focus for consumer education is aimed at the quotation and renewal processes. “We are committed to making insurance easy to understand,” says Neil Batchelor, head of retail at Aviva Direct. “We provide clear and simple explanations of all the terms we use, including excess, so customers can check what they are buying and make sure they get the cover that best suits their needs.”
As well as explanations of the terminology, Aviva also provides consumers with access to virtual assistants and an online customer service team to provide further assistance. Similarly, GoCompare makes sure its consumer education is provided in as many different formats as possible, including written information and videos, to ensure it reaches as many people as it can.
Different angles
With so many consumers focusing on price when taking out cover, Matt Jarvis, chief commercial and insurance services officer at Slater and Gordon, suggests using this as a hook. “What we need is for motorists to be provided with a better understanding of what is driving the cost of insurance premiums,” he explains. “It needs to be clear for drivers what the excess is, how it impacts the overall cost of the policy, when it has to be paid and what it covers.”
Another option is to draw customers’ attention to excess cover during the quotation process, with GoCompare taking this a step further by offering customers free £250 excess cover on its motor policies. Whether free or an additional charge, this helps to flag up the existence of an excess on the policy, enabling the customer to make an informed decision about whether it’s set at the right level.
Professional focus
The insurance profession is also working together to help raise consumer understanding of policy wordings. An example of this is the CII’s Chartered Transparency Forum, which was set up in 2020 to bring together consumer representatives, legal experts and insurance professionals to examine ways to best meet the expectations of customers.
Graeme Trudgill, executive director at the British Insurance Brokers’ Association (BIBA), is a member of the forum. “BIBA actively supports a move to more clarity in insurance policies and their operations,” he says. “Brokers act in the interests of their customers and are able to explain all of the terms and conditions to them.”
The personal service delivered by a broker provides a great opportunity to fill in any gaps in consumers’ insurance knowledge but, with the majority of personal lines business going direct, insurers are looking at ways to target education more effectively.
Data could deliver the solution. As well as open data from sources such as the Driver and Vehicle Licensing Agency and Ordnance Survey, insurers share claims, quotation and policy data to gain a better understanding of customers and stamp out fraud.
It needs to be clear for drivers what the excess is, how it impacts the overall cost of the policy, when it has to be paid and what it covers
“This insight can help insurers build stronger relationships with their customers, increase communications and ensure they have the right product,” says Martyn Mathews, senior director of personal and commercial lines at LexisNexis Risk Solutions.
“By making it a better experience, it also feeds into customer trust and increases the likelihood of engagement with their policies.”
Increasing consumer understanding of insurance is key to winning public trust. And, with the cost of living crisis putting the focus sharply on expenditure, the insurance profession must drive this education exercise to ensure customers don’t have any more unexpected shocks when they need to make a claim.
Sam Barrett is a freelance journalist
