HOME ABOUT US LIFE AT BGL JOIN US CONTACT US SearchContact Regulation and the customer – driving the trust that the insurance industry needs BGL Voices #digital #customerservice PHIL BYRNE ASSOCIATE DIRECTOR, RISK & COMPLIANCE ADVISORY 23 Nov 2021 BGL’s 2020 Customer Report talked about trust and how BGL uses its Customer Principles to ask ourselves the questions that keep us on track to build that trust with our customers. This approach has never been more important, with the general insurance industry reaching a pivotal moment in its ability to generate trust with its customers, as two phases of new regulation come into force. From 1 October 2021, firms are obliged to review all products at least annually to ensure that they are providing fair value to customers. From 1 January 2022, firms must provide renewing motor and home insurance customers with a renewal offer that will be no higher than the price that they could obtain as a new customer. These two fairly straightforward statements have caused more reaction and gnashing of teeth in the industry than any event I can recall – but from a customer experience perspective, it is absolutely the right outcome. Customers who have been unable (as opposed to unwilling) to shop around for the best deal should, from the new year, be able to trust that their insurance provider, whether insurer or broker, has put their interests first and not increased the renewal price based on ‘stickiness’, or their likelihood to renew. From a product perspective, customers should be able to trust that where a firm identifies that a product is not giving good value, it takes prompt action to rectify the situation. So, what has brought firms, some perhaps reluctantly, to this point? Regulation. Without the Financial Conduct Authority’s intervention into general insurance pricing practices, would the market have corrected itself, and returned to pricing based on the risk presented by the customer? Regulation: forcing the issue – but right to do so The need for regulation is typically driven by a long-standing failure to deliver what end-consumers need. To avoid regulatory intervention, market participants would instead need to come together and agree on the outcomes, and the methods of delivering those outcomes that customers should receive – self-regulation, if you like. Of course, in a highly competitive market such as general insurance, this is never going to happen. And so, the general insurance industry has, along with many other financial services sectors, faced years of focus from the FCA and its predecessor, the Financial Services Authority (FSA). I found the change from ‘Services’ to ‘Conduct’ significant; since its re-purposing in 2013, the FCA has had a much clearer focus on conduct (how firms behave towards customers) and has also devoted much resource to understanding how customers behave and to protecting their interests. This has led to the FCA’s inevitable conclusion that most firms do not go far enough in thinking about the customer experience: what customers think, see, do, and receive in exchange for their time spent filling in online forms, or talking with customer service representatives. The FCA has intervened in pretty much every aspect of an insurance customer’s interactions with firms. From product governance to marketing, selling, servicing, renewing, complaining and claiming, all have had (and will continue to have) scrutiny to push for better outcomes. And now the Regulator has turned its attention to the aspects of insurance that the customer does not see: pricing practices and assessing products for value. But the FCA is not done. It has already begun a consultation process on proposals to introduce a new Consumer Duty on to all regulated firms. What’s coming: a new Consumer Duty In 2020, the FCA appointed a new Chief Executive, Nikhil Rahti, and it looks as if his flagship policy will be the Consumer Duty, which proposes new principles and rules for firms to follow that are intended to “set clearer and higher expectations for firms’ standards of care towards customers”. They include proposals that will mean that firms will need to review their customer service arrangements for processes where ‘unnecessary cost, delay or stress’ may be experienced by customers. The FCA has also highlighted so-called ‘sludge practices’, processes designed to make it hard for customers to access the benefits of the product they have bought, or indeed exit the product entirely. The detail of the proposed rules is to follow by the end of 2021, but it seems clear that the package of measures will be designed to be transformative across all sectors of financial services. BGL insurance already works hard to understand how our customers feel about the experience they have when engaging with us both online or through our customer service representatives. Analysis of customer feedback is discussed at every executive committee and ideas for improving customer outcomes are welcomed. As a compliance professional, I welcome the challenge from our customer experience teams as to how we can make journeys better but weave in the regulatory obligations, rather than add them as a clunky bolt-on. As ever, the key is to never assume that the job is done. Our competitors, and our regulators, will not do so, and I’m confident that with our compliance and customer teams working together, nor will we. Related Blogs The Great Digital Shift 23 Nov 2021 The importance of inclusion in customer service 23 Nov 2021 Share this page on social media Share this page on Facebook Share this page on Twitter Share this page on Google+ Share this page on LinkedIn Sign up for job alerts Careers login Supplier Terms Twitter Facebook Linkedin YouTube SITEMAP PRIVACY & COOKIES ACCESSIBILITY TERMS OF USE MODERN SLAVERY STATEMENT © BGL GROUP 2019 BGL Group Limited (Registered in England No: 2593690) Registered Office: Pegasus House, Bakewell Road, Orton Southgate, Peterborough, PE2 6YS. Continuing to use this website gives consent to cookies being used. For information on how to disable them see our privacy & cookie policy. We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners. 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