Luke Holloway examines what the latest Public Trust Index survey shows about the impact coronavirus is having on engagement with the profession
The most recent Public Trust Index (PTI) research from the CII shows that businesses affected by the Covid-19 pandemic are becoming more concerned about exclusions in their policies -- particularly around liability and property insurance.
Although overall satisfaction with small and medium-sized enterprise (SME) policies remained the same as in the CII's 2019 survey, with 82% satisfied, the report suggests some businesses are moving into what is known as a 'forced trust' position. This means they may no longer trust that their policy will protect them adequately but continue to rely on it because of a lack of other alternatives.
In terms of individuals, the index shows that policyholders often still feel that their loyalty is not acknowledged and would like to see a benefit for staying with the same company at renewal.
As expected, consumers want claims to be settled quickly, but feedback also suggests they would like loyalty to be taken into account when calculating renewal quotes after they have made a claim.
Since 2017, the PTI has been surveying 1,000 individuals and SMEs, tracking firms that hold property, liability and motor insurance; and since 2019, the CII has also tracked SMEs' attitudes to their insurers overall.
PTI research carried out in January and May this year was done against the backdrop of the UK entering into lockdown, causing a serious economic impact on firms across the country and the world. This was followed by considerable publicity and debate over how insurers have been handling business interruption claims from firms forced to close during the pandemic.
The expectation could have been to see public perceptions of insurance turn sharply negative. However, the overall picture has remained remarkably stable considering the situation many business and individuals have found themselves in.
The most recent research was divided into SMEs that experienced little or no impact due to Covid-19, some impact, or significant impact.
The survey results indicate that SMEs that have experienced little impact are still focused on issues that existed before lockdown -- most importantly, renewal pricing.
SMEs that have been somewhat impacted are concerned about how the policy is explained to them -- levels of transparency and the quality of advice they have been given.
For SMEs that have been significantly impacted by the pandemic, the response was that it is too late to worry about the quality of advice given at the point of sale. These SMEs want immediate assistance around their claim and to know that the policy is going to address their needs. Their concerns around transparency are more around clarity of language, so they know how they can make their claim.
We need to ensure that we are transparent around cover and respond quickly and clearly to all enquiries -- whether they are covered or not
The research found that 87.8% of SMEs said the financial situation of their business has been somewhat or significantly impacted by the Covid-19 crisis.
Dr Matthew Connell, director of policy and public affairs at the CII, says: "The results support the idea that controversies around insurance rarely penetrate consumers' consciousness. It does at least suggest that the business interruption issue has not yet become strong enough to change the views of a majority of SMEs.
"An important point to remember is that SMEs have had very different experiences with lockdown. Entire sectors have closed altogether, while at the other extreme some may be busier than ever.
"The CII survey found that although the vast majority of SMEs have been impacted, just under a third have been significantly impacted."
In March, the UK government announced a business interruption loan scheme to help ease the burden on companies affected by the pandemic; however, an organisation's turnover was required to be a minimum of £45m so it will not have applied to the vast majority of SME respondents, if any.
According to Jeremy Trott, non-executive director of the Society of Claims Professionals, all insurers need to do more to help consumers and SMEs engage positively with the profession. "We need to ensure that we are transparent around cover and respond quickly and clearly to all enquiries -- whether they are covered or not," he says. "We also need to stay in regular dialogue around the Financial Conduct Authority test case and whether this changes the position in relation to the claim.
"Furthermore, we should be able to drive loyalty by providing an efficient and effective claims service that goes above and beyond customer expectations."
Liz Foster, non-executive director of the Society of Insurance Broking, believes three key skills are paramount in the current climate, presenting an opportunity for insurance brokers to establish their value both to purchasers and to insurers as suppliers.
"Firstly, communication," says Ms Foster. "Increasingly, business is being conducted by email. This can be highly cost effective but can also diminish the strength of communication and, consequently, the relationship between broker and purchaser, as well as the broker and insurer. A telephone call, if not a visit, is going to assist in building or retaining the relationship, the trust and the confidence.
"Purchasers need to have confidence that the advice being given to them is because the professional insurance broker thoroughly understands their risk; can identify risk mitigation and/or risk management requirements; understands the product and supplier range appropriate to protect that risk; and will make a recommendation for cover and supplier based on what is best for the purchaser and their risk.
"Finally, market understanding. The broker will also need a trusted relationship with insurers, as the suppliers and will need to be able to competently and efficiently communicate the risk, including risk mitigation and risk management features, as well as knowledge of an appropriate premium."
Ms Foster concludes: "The relationship between broker, insurer and client is key to moving the focus away from the lowest possible price to a focus on the most appropriate cover with the most appropriate insurer. This will result in insurance being viewed as a contract for cover rather than a commodity-based transaction."
At first sight, the controversy surrounding Covid-19 business interruption seems to have had little impact on SMEs' attitudes to their own insurance arrangements. Below the surface, however, the PTI suggests that firms that are affected by coronavirus are becoming more concerned about policy exclusions; and those that are moving into what is seen as a 'forced trust' position do not completely trust that their insurance policy will cover them if they need to claim.
What remains a common issue for both consumers and SMEs is that they would like to be rewarded for their loyalty. This is something the profession has been discussing for some time now and needs to address.
The PTI suggests that insurers need to take a three-pronged approach to building trust, including finding better ways to address the issue of renewal pricing, improving advice processes to ensure clients understand both the insurable and non-insurable risks and reaching negotiated claims settlements wherever possible.
This three-pronged approach is most likely to build trust among the whole range of SMEs, from those that are most affected to those that are least affected.
APPROACH TO BUILDING TRUST
- Find better ways to address the issue of renewal pricing. After almost two years of initiatives to improve consumer trust in this area, perceptions are still very low. The sector is still largely addressing this issue through tweaking communications with customers, rather than ensuring the experiences of new and existing customers are more comparable.
- Improve advice processes (and non-advised buying processes) to ensure clients understand both the insurable and non-insurable risks that they face, and what they can do about each one.
- Reach negotiated claims settlements wherever possible. There is still scope for firms to reach agreements with clients about the level of assistance that they can give, and assistance given at an early stage will build more trust than compensation given at a later date.
Luke Holloway is editor of The Journal