Matthew Hall examines how uncertainty caused by Covid-19 has changed consumer expectations of insurance
The pandemic has caused uncertainty about what the future holds both for the insurance profession and wider society, with coronavirus causing a massive global economic downturn as well as major impacts on employment.
This changing environment means customers are expecting flexibility in products and services. This behaviour is not just present in insurance, it pervades all areas of business. In the travel sector, not many customers would now consider booking a non-refundable holiday or flight. In the case of the property market, organisations are now much more likely to refuse to sign a long-term lease on an office if they do not know when or if staff will be able to use the facilities.
And so, to insurance, where consumers are now much less likely to buy an annual motor policy if they are unsure if they will be driving to work every day.
There can be too much focus on only compensating customers financially, when sometimes it is actually non-financial support that is more valuable to them in their time of need
However, if we can deliver flexibility in the way we design our products and services, there is an opportunity to engage positively with that uncertainty. This could mean pay-per-use policies as opposed to annual renewals, where the customer only pays for the cover they require. It could mean flexible cancellation terms or opportunities for the customer to reduce or increase cover mid-term without penalties or additional fees.
It might mean applying data in real time to make proactive and reactive pricing decisions.
A key opportunity is to design new products and services centred on flexibility. It is much easier to build flexibility in from the start rather than adding it to existing products, which has been a major challenge for some insurers during the last 12 months.
Providing such flexibility does also carry commercial challenges. It can add to the administrative burden and can even make corporate financial strategy and planning more complex. But there is also a considerable commercial opportunity. Flexible policies can fill gaps in the existing market, allowing insurance professionals to engage with new customer groups, especially younger and less affluent demographics. Flexibility can also reduce the feeling some customers have of being restricted or bound to the policy. If customers feel they are in control, this can help to develop greater loyalty and trust.
Duty of care
On an individual basis, most of us purchase cover in the hope that we will never have to use it. Insurance is somewhat of a unique product in that respect. But when things do go wrong and customers have to make a claim, they expect that insurers will put things right quickly and effectively.
In the past year, the pandemic has forced many more people to make a claim and, at that point, some customers and clients have discovered that their insurance is simply not as good as they thought it was.
Perhaps it does not cover the circumstances that they thought it did, or is full of complicated wordings and exclusions. Therefore, a priority for the profession should be clear communication about exactly
what the customer can expect from their policy.
A significant amount of customer behaviour is still driven by either price of the product or trust in the provider. But customers’ minimum expectations of technology are increasing rapidly, with functionality and accessibility becoming priorities
In addition, there can be too much focus on only compensating customers financially, when sometimes it is actually non-financial support that is more valuable to them in their time of need.
Consider an example relating to extreme weather, rather than coronavirus. There have been reports in the UK that people who have been victims of property flooding were significantly more likely to suffer with mental health issues in the following year.
Of course, an insurer can send equipment to pump the water out of the house and financially reimburse the owner so they can replace their furniture and possessions. But, increasingly, that is viewed as a minimum level of service. What do we do if our customer is suffering from depression caused by the loss they have suffered? Insurers should have a duty of care that goes well beyond repairing physical damage.
That does not mean that insurers need to become carers or therapists for customers and clients. However, what professionals can do is equip themselves with listening skills and the awareness to identify vulnerabilities such as mental health issues and direct those customers to the help they need. This might be through working with charities or external organisations that have expertise in providing support.
Having a duty of care to customers is an essential part of being an ethical professional and ensuring that our profession has a positive societal impact. With that in mind, it is important to remember that there are commercial benefits to this approach too. A customer who was provided with help when they need it the most is more likely to trust you and that trust builds loyalty and good reputation. If I really feel that my insurer cares about my wellbeing, why would I look anywhere else for cover?
In addition, a proactive approach has benefits too, because tackling these duty-of-care issues before they cause significant negative effects will be more cost-efficient for the insurance sector in the long term.
Last year, almost overnight, many people found themselves working from home. In many cases, individuals were only able to leave their homes for specific and limited purposes. Of course, these restrictions have been different across the world, but most people experienced them in some form or another.
This change led to an explosion in the use of technology and particularly digital communications. We have not only learned how to use, but become comfortable with, video calls for team meetings and dealing with clients and customers. Many of us have had to quickly adapt to making purchases and transacting business entirely online.
It is useful to consider technology as a facilitator to respond to other customer expectations, rather than as an expectation in itself. For example, in a remote environment it is almost impossible to engage with customers about their wellbeing if you cannot communicate with them virtually. It does not matter how great your flexible cover products are if it is difficult for customers to find them and purchase them.
A significant amount of customer behaviour is still driven by either price of the product or trust in the provider. But customers’ minimum expectations of technology are increasing rapidly, with functionality and accessibility becoming priorities.
Many members of the CII reported a period last summer where customers were willing to be accommodating and sympathetic to organisations dealing with the same unprecedented challenges that we all faced. Those customers understood that many teams and individuals were working remotely; and digital communications processes and virtual engagement might not be immediately perfect.
That period is now over. In many markets, people expect those adaptations to be complete and they expect to be able to make digital transactions with ease. Organisations that can deliver high-quality ‘at-home’ functionality and services will build trust through communication; and can gain a critical commercial advantage in reaching customers and clients.
It is important to note that these are not necessarily new themes. Trust and reputation have always been key to building customer loyalty and digital technology has been an important issue in insurance for more than 20 years. These issues have now been accelerated or highlighted by the pandemic and, when we consider them in the context of the expectations of our customers, we can truly appreciate how much things have changed in the past 12 months.
Matthew Hall is strategy and operations manager of the CII