Recently, I participated in an international forum where it was observed that there is a common public perception that insurers use jargon and technical terms, so customers won’t understand what they are buying or to limit claims payments.
How many of us have heard derisive comments about insurers’ fine-print or that we reach for clauses to exclude any and every claim?
Inquiries into selling inappropriate life policies across the Tasman have prompted regulators in New Zealand to ask questions about conduct here. Under the media spotlight, it has been announced that all insurance law will be reviewed.
All these issues go to the heart of public trust in insurers to deliver on their promise when the chips are down. As a sector, we are particularly vulnerable. We sell a product that only a small minority gain tangible benefit from in terms of reinstatement of loss, for the rest we depend entirely upon how much value is placed on payment for ‘peace of mind’.
If our customers have one poor claims experience, it is likely to lodge with them for much longer than with other sectors. Why? Partly because of the harm of a perceived ‘broken promise’ but also importantly because we have so little interaction with our customers beyond the myriad of written material sent at renewal time with an invoice.
You can have one poor bank experience that can be extinguished by several quality engagements. People interact with their bank or their telco far more frequently than with their insurer. We have limited goodwill to fall back on, so when issues arise that question trust in insurers our vulnerability is laid open.
We recognise the answer lies in being customer-centric, but we have a long way to go. Nothing though could be more urgent.
In Norway, the equivalent of ICNZ provided experts in linguistic analysis to assess insurance policies given to consumers. They found not only was the content incomprehensible, but they also identified the material engendered deep, adverse perceptions of insurers. In Spain, our equivalent formed a working-group comprising legal and communications/marketing teams to identify the 50 most common jargon terms in policies and converted them into simple synonyms or explanations. These are now used as guidelines for insurers.
In New Zealand, many general insurers have simplified language and used plain English experts, but they are just too long for most people to read.
Investment in financial capability to enable people to operate in the world is critical, but it does have its limits. We can never expect to educate people on every line of insurance and nor would they have the slightest interest in being educated until something goes wrong. Australian research shows consumers are confident in what their policies cover, but actual understanding of exclusions and limits is poor.
What is needed therefore is not just simple language, but simple products. Having shorter contracts and making use of digital platforms to enable customers to choose the type of cover they want would go a long way to meeting consumer needs. When customers have ownership and understanding of what they have bought we’ll have tackled half the problem.
The other half lies in the delivery of the promise at settlement. The vast majority of consumer claims are well understood. Technology and data analytics are increasingly going to enable insurers to settle those claims in very short timeframes. If we can make the claims experience great, then we will solve the trust challenge and consign the myth of the fine print to scrap-heap of history.