Home / Analysis / Love to hate ’em
5 March 2012
The complexity of the insurer/consumer relationship can be summarised thus: insurers are trusted and loathed in equal measure while customers are satisfied with their insurer yet itching to switch.
How many industries can claim 87% of post-claim customers were “quite or extremely satisfied” – all in the context of rising catastrophe claims – while at the same time watch as 70% of their customers “proactively research their options when shopping for their next insurance purchase”?
It’s a paradox that lies at the heart of a public image problem that has plagued insurance for many years, where the sum of the sector’s individual parts is worth more than the whole.
“When you ask an individual they are generally pretty happy with their insurer, but you ask them about the industry and they report unfavorable things,” Ernst & Young Customer Advisory Leader for Insurance Andrew Taggart told insuranceNEWS.com.au.
“It comes back to an image problem. The industry as a whole needs to get out more good news that insurers, on the whole, are doing a good job.”
The latest survey by Ernst & Young of 24,000 insurance customers – including 1000 in Australia – reinforces the narrative that insurance is seen by customers as a necessary evil, and one that attracts little loyalty from them.
This is partly the fault of insurers. Mr Taggart says most customers never speak to their insurer unless they’re making a claim or when their policy is up for renewal – a process that often involves no contact beyond an automatic transaction.
“Insurers need to have more of a relationship with their customers,” he said. “People are looking for a reinforcement of the value of their policy, that they are getting a good price and will have a good claims experience.
“People want those customer value propositions reinforced.”
The communication channels where these propositions can be enforced have grown exponentially over the years, with the explosion of social media sites such as Twitter and Facebook.
With customers increasingly using social media to research their options, he says insurers must find a part in the conversation.
“The take up of social media is supercharging the friends and family referral network,” Mr Taggart said.
“Where in the past you may have asked 10 people at a barbeque, people are now asking hundreds and thousands of people online.
“It’s an area where the industry is trying to keep up but things are moving incredibly fast.”
Mr Taggart says consumers also want simpler and more transparent life and wealth insurance products. More than a third of consumers surveyed find existing life and wealth products too complicated.
“The need for clarity and transparency in the buying process is not driven purely by customer preferences,” he said.
“Insurers that align themselves to a truly customer-centric model will find the transition to the new regulatory environment less painful, and will gain competitive advantage.”
The complexity of product disclosure statements (PDS) has long been a point of contention among consumer groups, particularly in the wake of last year’s Queensland floods when many policyholders were informed they were not covered.
In October last year consumer advocacy group Choice gave the insurance industry a “Shonky” award for poor customer service and confusing English and definitions. It has since supported improvements to flood insurance cover, including standard definitions of flood and clearer disclosure of key facts.
Spokesman Ingrid Just says despite mooted changes to flood cover wordings and PDS documents, insurance contracts “remain bamboozling”.
“It’s clear in the feedback we receive that the insurance terms and conditions are very difficult to understand,” Ms Just said.
“Part of this is about the consumer taking responsibility for reading a document, but it’s important the details of terms and conditions are understandable for the regular person who doesn’t have a high-level law degree.”
Consumer Action Law Centre Director of Policy and Campaigns Gerard Brody says the report makes its obvious there is still much ill-will directed towards insurers.
“The fact people are switching and shopping does increase the need for clear and understandable policy documents that has been lacking in the past,” Mr Brody said.
“It’s in the best interests of insurers in looking to retain and get new customers that they make their policies more easily understood and clear to reduce the likelihood of problems down the track.”