Are insurers asking the right questions?
Businesses today operate in a world of ever-changing regulations with the insurance industry a perfect case in point. Companies already need to comply with rules such as the Financial Services Authority’s Treating Customers Fairly (TCF) initiative as well as ensuring the meet tightening solvency regulations.
The new financial year will see a new regulation become law. On April 6, the Consumer Insurance (Disclosure and Representations Act) 2012 comes into force. What this means is that the consumer’s existing duty to volunteer material facts will be abolished when applying for insurance policies. Instead, customers must take reasonable care to answer their insurer's questions fully and accurately. Essentially if a customer makes honest but reasonable misrepresentations when they take out a policy any claims they make will still be valid.
This is a major change in the relationship between insurers and customers with the new law intended to increase the number of claims payouts. Rather than consumers having to volunteer information (and having claims thrown out if they fail to provide relevant facts) it is up to insurers to ask the right questions in order to assess potential risks and set premiums accordingly. So how can insurers ensure they are ready for the new law? Based on Eptica’s experience there are three main areas to focus on:
1 Change the script
Existing sets of questions used when assessing risk need to be amended to cover areas that were previously considered part of the consumer’s duty to volunteer themselves. So scripts for sales agents (both your own and those of partners and brokers) and online forms need to be expanded to ensure they are clear and don’t leave any unforeseen loopholes. Make sure they are straightforward and don’t let sales occur until all the information is safely gathered to minimise risk.
2 Provide more information
The vast majority of motor, household and personal insurance is now bought online so companies need to ensure that their websites explain what the new questions mean in layman’s terms to prevent confusion. Insurers should invest in web self-service systems that provide instant, accurate answers and web chat from live agents to deliver support to consumers to ensure that the customer journey runs smoothly.
3 Collect and analyse answers
Simply collecting information from consumers meets the letter of the law, but it then needs to be used to analyse risk and provide insight into your customer base. What answers are consumers providing to particular questions – and does this vary by type of policy, by channel or geographic area? Analysing this information will not only enable accurate setting of premiums but can also be used to launch new products designed to meet changing needs.
Increasing regulation is a fact of life for insurers – investment in flexible technology to underpin customer interactions will not only help meet this new legislation but also futureproof their front office and increase efficiency moving forward. There’s more on the challenges facing insurers and how to solve them in the latest Eptica white paper, available for download here.