The current news about the economic and financial crisis has become so repetitive over the recent months that I would guess many people switch off when they hear it, or read it yet again.
However, we need to wake up because it has implications and opportunities for the life and disability insurance market, especially income protection (IP) and its associated product waiver of premium. Critical illness (CI) insurance and even life products could also be affected.
I have lived through a couple of recessions and I have seen the cycles that can occur.
There is no doubt that more people get ill or feel unable to work in a recession. Given that this is a global financial crisis of proportions never before seen, I would suggest its effect will be long reaching.
Claims could increase in volume because of a number of factors, from overwork due to the redundancy of colleagues, to the claimant’s own, justified, fears about losing a job and livelihood through to a valiant attempt to dodge redundancy by being ill.
Human nature dictates that this will result in an increase in suspect claims or indeed downright fraudulent claims. Anecdotally, in Ireland, which has been particularly hard hit by the recession, there seems to be a significant increase in fraudulent claims. I’m sure much the same is happening here too. Currently less and less funding is being provided to allow assessors to do their job and access the experts who understand and can help.
Furthermore the industry is currently in a cycle of short-term projections and short-term goals brought about, in my view, virtually solely by the boom of the last five years. This has meant a lack of coherent long-term strategy being developed or implemented within almost every provider firm. In order to win, one must always develop a serious long-term strategy; without that one ends up chasing one’s tail.
The increased regulation through the Treating Customers Fairly initiative and the decisions and ethos of the Financial Ombudsman Service has bought this industry up short on many of it failings or rather asked, “what they could do better”? Some of it was very rightly judged but what has happened since is something akin to the coal industry shutdown during the early Thatcher years. Haven’t we learnt something more positive since then?
Furthermore the industry is facing the advent of a new Insurance Act, which will make some more very significant changes to the product ranges, the rules and the remedies afforded to all parties, or so it promises. All this requires the investment of more time and money and the stretching of budgets which, if we continue as we are, won’t just mean a shut down but the complete annihilation of this industry. Please don’t get me wrong, I’m a huge supporter of what the Law Commission wants to achieve and seriously can’t understand why it wasn’t achieved years ago.
SO WHAT IS THE RESULT?
But I see an industry that is currently deathly quiet. It seems to have its head down and even potentially in the sand – well buried. I see nothing but cost cuts which all bring short-term – alleged – gain but nothing more. Those alleged gains are solely there to provide comfort to shareholders and allow a couple of important bodies to feel that they have achieved what they said they would do (which is always short-term so they can get their bonuses or golden handshake before they move on to the next victim). How short sighted is that?
I see the public perception of insurance, banking and indeed any big financial institution at an all time low, almost as bad as the perception of our current government if that’s actually possible. With the exception of one or two providers, I see no innovation in product development and fewer “good news stories”. I see a workforce being under- developed and under-stimulated, lacking in encouragement, training and a “can do” attitude. Historically and indeed today they are paid far too little for what they have to do. If you don’t value the person assessing the claim, the person who truly gives a face and name to the industry, well then all the public can do is mirror that lack of faith. What other choice do they have? The assessors are given too few resources, allowed little or no expert help and then blamed when a customer gets the press so interested in their shortcomings. However, had they been funded appropriately there is at least a decent chance of a very different result.
Despite the fact that we, as a society, are disgracefully under protected nothing happens other than budget cutting, battening down the hatches and leaving this protection gap alive, well, thriving and growing.
To those insurers reading this, I say that having customers is what makes your business happen. Having happy customers or at least customers who understand your stance also makes business happen. Putting your resources (especially now) into those people who deal with those types of customers is not just more important but utterly vital. Saving those types of costs this quarter will surely ensure that you’re struggling even more so, five quarters hence, so please get strategic. Get out of the boardroom and into the marketplace. There is a huge opportunity to fill the protection gap with new products, coherently priced products and a level of customer service that beats India every time.
For too long we have given the customer what we think they need, rather than finding out what they want. We also expect them to trust us, yet we do not trust them. What message does this send apart from that we are arrogant, looking for ways to wriggle out of things and that we are not to be trusted? No wonder we have Treating Customers Fairly and the Financial Ombudsman Service. Watch, too, for the implications of what the Law Commission is proposing.