The Covid-19 pandemic hit the industry’s reputation hard – now, the sector is scrambling to get to grips with expectation gaps and marketing in a bid to boost customer relationships
The recent admission from the ABI that the insurance industry needs to redouble its efforts to boost customer trust will come as little surprise to many.
For example, during a speech in February 2021 addressing learnings from the Covid-19 pandemic, the ABI’s director of general insurance policy James Dalton said: “For an industry that had a problem with consumer trust before the pandemic, this [business interruption insurance] episode has made things worse.
“Despite the fact that an average of £17bn of claims are settled each year, there continues to be a deeply-held customer perception that insurers always try to wriggle out of paying.
“It is often said that claims are the shop window of the insurance industry, so it is essential that we redouble our efforts as a sector to pay valid claims quickly and with a simpler customer journey.”
Research over the years has repeatedly shown that the level of trust insureds have for insurers is low, with the former believing - rightly or wrongly - that the latter will do whatever it takes to avoid paying out on claims.
For example, the FCA’s Financial Lives 2020 survey, published in February 2021, found that there has been a steep incline in the number of UK adults who believe insurance companies rarely pay out, from 22% in February 2020 to 34% in October 2020.
Despite insurers such as Hiscox and Allianz confirming steady payouts for Covid-linked business interruption (BI) claims, the pandemic is proving something of a lost opportunity for the industry, with much of the media focus centred on businesses battling for BI claim compensation through the courts.
If insureds, whether they are businesses or consumers, reduce their insurance cover for reasons of trust – or affordability – it could cause an increase in underinsurance that may hamper the UK’s post-pandemic recovery.
This problem poses a number of challenges for the insurance industry, including how to rebuild trust with insureds, demonstrate the value and effectiveness of cover and restore faith in the claims process.
Steve White, chief executive of the British Insurance Brokers’ Association (Biba), said: “I have expressed before my wish that there was more positive reporting of the good that insurance does.
“Insurance hits the consumer headlines when claims are not paid, but the ABI’s Key Facts 2021 document, [published in February 2021], shows that far from avoiding claim payments, the general insurance sector paid out more than £60m per day in claims [in 2019]. That’s not to say that there is not more that can be done.
“The pandemic perhaps brought to a head the question of making insurance policies easier to understand and I’m pleased to see that there appears to be much more collaboration around providing clarity of cover across all classes of insurance.”
Mind the gap
One example of this type of collaboration is the Chartered Insurance Institute’s (CII) transparency forum, which was set up in September 2020 to examine how the industry can best meet the expectations of consumers.
The forum brings together consumer representatives, legal experts and leading practitioners from across the insurance profession. It aims to address insurers’ expectations in policy coverage versus customer understanding, working to improve public trust by reducing the gap between these two perspectives.
Sian Fisher, chief executive of the CII, said: “When people buy insurance, they are buying a promise of help when things go wrong. But too often, there is an expectation gap between what customers thought that promise was and what the provider intended.
“To improve trust, we must understand exactly what leads to that gap and how we can reduce it together.”
Biba supports the work of the CII on trust in the sector and how this can be built through improving customer outcomes and reducing the expectation gap.
White continued: “Once customers really understand what they are buying and how it operates, the more they will trust their purchase.
“For those people and businesses that perhaps sit outside the parameters that are accepted as a ‘standard risk’, insurance brokers and specialists are really well placed to offer solutions.
“Biba has worked with our members, insurers and other stakeholders to build on the practice of signposting customers that a firm cannot help to one that can. This began in 2012 with the joint Biba, ABI [and] government agreement on age and insurance.
“Since then, we have put in place an agreement on protection insurance and created a medical travel firms directory that meets the FCA criteria, which will help those with medical conditions access insurance.
“Central to these initiatives is recognising customer need and addressing it for them. The more insurance works for people and businesses the more trust will grow.”
PR as an investment
As the insurance industry strives to improve its image and reputation with both consumers and businesses, marketing and public relation (PR) strategies, therefore, have an important role to play.
An effective PR strategy can help the industry generate both recognition and trust in its target audience. This is especially important in an industry where products are often seen as unnecessarily complicated, confusing and even misleading.
Tom Blackwell, managing director, strategic communications at FTI Consulting, explained: “When it comes to reputation, there are no shortcuts and it’s important that companies recognise that PR needs to be a long-term investment, rather than something they only do when times are good.
“The fundamental role insurance plays in enabling businesses and people to recover from the most challenging of situations, or to take [the] risks needed to grow and innovate, is arguably less well understood than it should be – despite billions in claims being paid out every year.
“This is exacerbated by a perception that communications can be overly complex, opaque and laden with jargon. Insurers should be confident in articulating the critical role they play for companies, people and economies and explaining this in a way that is accessible for a wider audience.
“By doing so, they can increase trust, improve understanding and further move the narrative from ‘a cost of doing business’ to a positive enabler. PR can be a powerful tool in shaping and delivering this story.”
Ultimately, it is imperative that the insurance industry rebuilds the confidence of insurance buyers, whether they be consumers, small businesses or large corporates with sophisticated risk management processes.
Restoring confidence in the industry and trust in its products will not happen overnight. However, a combination of initiatives that work closely with government and regulators on the challenges ahead, alongside customer reforms to improve trust, will pay dividends in the long run.