Industry ‘critically misunderstood’ by its customers
Consumers misunderstand and mistrust the insurance industry even though it was not to blame for the financial crisis, according to FCA head of general insurance and protection Simon Green.
Addressing brokers at an insurance regulation conference in London on Tuesday, Green (pictured) acknowledged that the insurance industry “hasn’t been as deeply scarred” by the financial crisis as banks.
However, he added: “That doesn’t tell the whole story. Our customer research indicates that the insurance industry may be critically misunderstood by its customers, and worse, customers lack confidence in insurers and at best see buying insurance as a necessary evil; transactional business rather than one that can add value to their lives.”
The problem stretches to brokers. Green said: “Our work on motor legal expenses insurance suggests there is little or no relationship between customers and motor insurance providers. This research included brokers. So it isn’t only a challenge for insurers.”
Green said that the insurance industry and the FCA had a shared agenda in rebuilding customers’ trust in insurance. He said: “We all want customers to see the value in insurance and buy it with confidence.”
Broker conflict review
In the same speech, Green announced the launch of the FCA’s new thematic review of broker conflicts of interest.
The review will focus mainly on payments insurers make to brokers outside the normal commissions, such as profit share and payment for volume – also known as contingent commissions.
While the FCA typically focuses on protecting individual consumers, the broker conflict review review focuses on insurance provided to SMEs and micro-businesses.
Green explained: “The recent interest rate swaps experience demonstrates that although SME customers can be sophisticated in terms of the businesses they operate, it does not necessarily follow that they are sophisticated buyers of financial products and services.
“This [thematic review] will help us test whether the essential everyday insurance products that those businesses need are designed and delivered fairly.”
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