Assured Futures led a research project earlier this year to investigate why policy cancellations – across various protection products – are on the increase. Ian Sawyer, commercial director of Assured Futures, reports.
The need for more of a human touch – one of the key results from Health Insurance & Protection’s own research – was also the overriding outcome from a big piece of work led by Assured Futures earlier this year.
We had noticed that policy cancellations (especially year one) were slowly but surely rising year on year. This was happening in spite of seemingly better products and improved policy benefits. It didn’t make sense. Another apparent anomaly was that, in spite of all the great claims reporting by insurers, consumer distrust in the industry prevails. In fact, financial services remains the least trusted sector according the 2019 Edelman Trust Barometer. We wanted to take a deeper look at this too. So, together with L&C Mortgages and Cura, we investigated insurer cancellation processes across various markets: life, over 50s, income protection, private medical insurance and accident & sickness cover. We focused specifically on direct debit cancellations, missed payments and reinstatement. We also looked at how brokers work in tandem with insurers to minimise cancellations and maximise recovery / reinstatements. On the back of this significant piece of work we produced a best practice document – for the benefit of all firms – to help better tackle this shared problem for both insurers and distributors. Here is an overview of the key findings.
We found the quality of letter writing across most insurers to be very poor, with poor explanations of options and precious little empathy or understanding. Also, few clear calls to action and intermediary advice was rarely acknowledged or suggested. That said, Shepherd’s Friendly should be commended for its more human touch and style. Also, LV=’s inclusion of the broker contact details represents a nice touch. We’ve put together an example letter for all firms – one that removes all the blurb and Ts&Cs and that reads altogether more ‘human’.
2. Letter frequency
It seems the stronger the contact strategy in the first four weeks prior to renewal, the better the results. It’s worth highlighting Bupa here. They don’t phone, email or text – as per most other insurers – instead, they send a weekly letter and they get positive results on the back of this. It seems that something tangible that hits your doormat still gets noticed even in this tech-filled communications age.
3. Use texts as a reminder
We were surprised to find that so few insurers use text. While not appropriate to deliver a complex message, text is very good as a reminder and for driving phone calls to a number linked within the body of the text. Aviva Home Insurance use text to great effect with super response rates.
4. Early notice to intermediaries
A consistent feature of good performance is the earlier the insurer informs the intermediary, the better the retention. For example, Legal & General’s ‘early warning system’ allows the broker to make personal contact with the client and check the reasons for failed payments/ cancellations, often resulting in saved clients.
Instructions to reinstate direct debit mandates, change bank details or retake payments must be allowable verbally to help both the policyholder and / or the broker. All too often, clients are passed from pillar to post. And cancelling quickly due to nonpayment (some on day 7 or 24) does not cater for busy lives, buyer remorse and consumer behaviour. Allowing reinstatement up to 90 days in arrears helps with retention.
6. Get the product on the bank statement
Insurers do not seem to appreciate consumer behaviour. Eighteen months into a policy the client will often forget what policies they have in place and with whom.
People look at their bank records and think ‘what is that?’ then cancel the direct debit first and worry later, knowing that if it is important someone will write to them quickly. Yet few insurers state the product name on the statement, so the user often has no idea what the direct debit is for, further compounded by daft practice where some insurers still use former trading styles as the name that appears on the statement. And friendly societies not really appreciating that most consumers probably think a friendly society is a local charity rather than an insurance provider. Shorter-named insurers have an advantage here: for example “Aviva Life 01234567”. Since carrying out this piece of work we’ve fed back to all the insurers that we assessed. We’d also be delighted to hear the views of intermediaries. Should this kind of work be considered a potential charter?
This article first appeared in the Health Insurance & Protection 2019/20 Industry Report, which is available here.