Consumer trust in insurance has been dropping steadily for over a year, and although the legislative landscape is changing fast for financial services, many insurers have been independently taking steps to reassess their practices and redesign their processes in the customer’s favour.
Amid this landscape, Tower Insurance CEO Richard Harding says it’s important for insurers not to fall back onto the reasoning which has become commonplace – that the lack of trust is down to insurance being a grudge purchase, and the customer’s lack of understanding of insurance products. He says insurers should instead be taking steps to simplify their offering, as transparency is always the best path towards trust.
“It is clear that we need to do more to deliver on good customer outcomes, and confidence in our industry is at an all-time low,” Harding said. “Unfortunately, if you look at the ICNZ’s research, it shows that trust has been in decline for around the last year and a half. That’s disappointing and tough for us to hear, because I’m sure none of us come into work each morning to make things difficult. At the heart of it, insurance is a vital commitment product, and people do care a lot about it.
“It is fundamental to how communities work. It is the core of the economic stability that allows them to thrive, and to respond to disasters. It enables businesses to invest and grow by taking calculated risk, and it gives families the security to borrow money, and to create homes and lifestyles. All of these people are comforted by the fact that their insurer will be there to help set things right when things go wrong, so when we think about the common industry purpose, those excuses over it being a ‘grudge purchase’ – they just don’t stack up.”
Harding says that while customers should care about every aspect of their insurance, the industry itself has conditioned them to think that it’s all too hard. It has set up confusing discounts, penalised people for making claims by taking away their no-claim bonus, and incorporated complex jargon into policies which even lawyers struggle to understand.
“We expect customers to tell us everything, and in return, we tell them the bare minimum,” Harding said. “We design our processes to catch the 1% of insurance fraud, rather than care for the 99% of our genuine customers. I know that Tower has been part of that problem in the past, but we are committed to making a better future.”
To address this, Harding emphasised the importance of policies written in plain English, advocating the ‘2 page policy’ that Tower is hoping to adopt – a policy that removes a lot of ‘ifs’ and ‘buts’ from the policy terms. He also noted Tower’s removal of duty of disclosure earlier this year, which removes the catch-all question ‘is there anything else we should know?’ from every policy.
“The reality is that simplicity and transparency of product coverage will make things clear, so that there can be no disputes or confusion at claim time,” he commented. “That was not just about removing that question from our processes, it was about removing the implications of that questions for customers. At claim time, customers who have been truthful, lawful and honest will simply have their claim paid.”
Harding also noted that despite the bold statistic of over 90% of insurance claims being paid out, one in five customers at Tower actually end up withdrawing their claim, with 20% doing so because they thought the insurer wouldn’t pay it.
“As a result, it’s no wonder that confidence is at an all-time low,” Harding said. “Creating simple products, writing them in simple wording and removing catch-all questions is our way to break this industry norm.”
On the compliance side, Suncorp New Zealand chief risk officer Helen McNeil says the industry has actually been making attempts to hold itself to a higher standard for many years, and was occasionally even ahead of the regulators in that space. However, she acknowledges that there is still a lot of work to be done, and that a cultural change should be built firmly on accountability.
“Working in the litigation team, people say it’s about “delay, deny, defend,” but I’m glad to say that that hasn’t been my experience,” McNeil said. “However, the reality is that there has been challenge coming from various different directions, and the headlines following the Australian Royal Commission haven’t been great. Regulators have said that until the FMA and RBNZ kicked off their conduct and culture review, nobody was taking good conduct seriously – and they’re both wrong and right.”
McNeil acknowledged that the sector has not always placed customer interests first, agreeing that clarity and transparency was key to changing this around. However, she highlighted that it should not be a fear of enforcement that drives this change, but rather a genuine desire to operate with the customer at the front and centre.
“The regulators are wrong in saying that we haven’t been taking this seriously until they came knocking,” she continued. “There are a number of things that we’ve been doing as an industry to prove good customer outcomes for many years, and all of ICNZ’s members have been adhering to the Fair Insurance Code since 2011. That Code has evolved much more rapidly than regulation has kept up with, and that has driven significant improvements around what the industry has been doing.”
“We mustn’t lose sight of why it’s important for us to get this right,” McNeil added. “We need to get it right because insurance is such a fundamental and valuable commodity for our economy and communities.”