Open any insurance magazine and it is a pretty safe bet that someone, somewhere, is bemoaning their company's results and expressing concern for the future of our industry. And well they might, given the scale of recent losses.
Yet contrast this with the plethora of current insurance consumer advertising, where the pitch to the much sought-after customer still seems to be very clear indeed. Price remains the key issue and the marketing message is: come to us and buy it cheaper.
Our industry has a fixation on selling its wares on price and a seemingly suicidal desire to give more and charge less against a background of rising costs and increasing claims frequency. We seem to put more and more effort into selling our products for less.
The thing is, customers buy insurance because they have to and not because they want to. And then what do we offer? A service that is often complex, boring and stressful.
There are plenty of obstacles to clear and many barriers in the way. Proposal forms, declaration forms and instalments applications – all just to buy cover in the first place. And all this for something people don't really want to buy anyway. Then a claim occurs and even more barriers are created.
Questions over questions
Enormous strides have been made in recent years to improve customer service. Yet people still associate much of the hassle and worry that comes out of any accident as the prospect of dealing with the insurance company.
Under the present arrangements we ask a lot of questions, receive a premium and promise to pay. The trouble is that, when the insured event actually happens, we then go back over the questions to make sure the information we were given in the first place was correct. And then we get some more forms filled out.
Now no one wants to encourage fraud, but we carry out this checking process on every single claim, so it is no wonder we alienate our honest customers. It would seem to be a case of “guilty until proven innocent”, rather than vice versa.
Surely, consumers want their lives made easier, not more complicated? The fact is that the association between insurance and peace of mind with the general public has probably not changed greatly over three centuries.
Fire insurance kicked off because people realised they needed cover when their houses burned down. Life insurance originally paid for people to be buried properly. Sea-borne trade was highly lucrative, but the ships of the time did not always make it home, thus cargo insurance.
Beyond these simple examples, it has been a hard slog to extend overall public awareness of the benefits of insurance protection into the more intangible areas. For example, take a look at the number of people still without contents cover for their homes or the limited take-up of personal accident insurance.
Gearing up for change
Surely it is time for change? Maybe after 300 years we are about to wake up to the fact that our fascination with price and inadequate service is the road to ruin. We need to start thinking about what customers really want.
Today consumers are generally asset-rich and time-poor. Yet perhaps there is hope on the horizon. A few brave souls have even suggested recently that “insurance” should be dropped as the title of the service that we offer.
Probably because the “insurance” brand is too blighted by public misconception and unease to take us much further?
The extent to which risk management is becoming a core service in its own right has led to suggestions that it is the insurance cover itself that should be bolted on, rather than having other services tacked on to the insurance.
But does this innovative thinking stretch far enough? Maybe we need to revisit the customer proposition in its entirety so that we truly get back to providing “peace of mind”. For there is a growing gap in the market for protection products, just waiting to be filled.
If we ignore the melting of the polar ice caps, impact by asteroids or volcanic plumes from inside the earth reaching the surface, the biggest worries today are a lack of time and a concern about being ripped off.
Whether it is builders, double-glazing sales-men, plumbers, financial service organisations, banks or, dare I say it, insurance companies, we all worry about finding the right solution to simple, day-to-day problems.
In a period of higher average disposable incomes, it is not so much the cost of these services, but the ability to find suitable people to carry them out. The ageing population is naturally a factor in this, but it also applies to anyone buying a home or starting a family in the period of life when money is usually tight.
Service providers already have lists of approved contractors that they monitor and vet. What is more, if anyone is found to be under-performing or adopting any dubious practices to part customers from their money, then they are simply expelled from the panel.
So it seems that customers need a champion; an enterprise that can be trusted to manage day-to-day problems and offer help should difficulties arise.
Theory and practice
In fact, such facilities already exist and there are a number of small internet-based organisations that will carry out these kinds of tasks. At the moment, they are usually aimed at the wealthy, but you can arrange for them to help with literally any problem you might have, round the clock. Expanding such a service is the entrepreneurial dream, but setting up the structure is not so easy.
The insurance industry already has most of this concept in practical operation – in the form of its various approved panels. Insurers are also very large and secure businesses, with plenty of clout to ensure a good deal. In short, they are ideally suited to be the customer's friend.
The industry is also used to offering any financial protection needed and this, of course, is where the core product comes back into the equation. Is this then how we can change the insurance model and get it back to providing “peace of mind” and offering the type of service that people really need?
It is more than just sending a bill once a year against the possibility that the cover we offer might be needed. It has to be about providing an ongoing service that is useful, professional and trustworthy and one that offers genuine value for money.
Whatever the name – call it lifestyle management if you will – the insurance element, contract of indemnity or risk-bearing portion should perhaps be a secondary concern.
Consider for example, someone buying a car. The customer does not want to think about tax, MOT, servicing, valeting, replacement or insurance. They just want the car, with the rest included. The same can be said about buying a home, managing a business or looking after a family's well being.
So, perhaps we need to consider reversing our offer. Service first. Protection second. The future could be about bundling products and services to make them more attractive and easier to understand and buy. We can then remove the reliance on price and sell on the service and value we provide.