The FMA’s recent survey of how consumers see the financial sector, including insurers and brokers, is worthy of reflection and further understanding.
The FMA wants the survey to be a pre-CoFI benchmark, so it is important to analyse the results and look at how to improve.
Some media chose to highlight that only 48% trusted insurers compared to 67% who trusted banks; but what we know is that those who have made a claim have significantly higher trust in their insurer. Interestingly, the survey also showed that 80% of all claims were completely successful and 13% partially successful.
Claim time is the touchpoint for trust in insurers. It’s unlike an ongoing experience with banks where the trust revolves largely around regular interactions, a return on investment or obtaining a loan to do more in one’s life. The basis of insurance is that money is paid over, but it will generally always be a minority who insure that have made a recent claim. So, a fundamental difference exists.
That said, there is plenty where more work needs to be done. The survey says only 31% know what to do if they were treated unfairly by a financial service provider. ICNZ’s own surveys show few people are aware of the Fair Insurance Code despite our members displaying its logo, promoting it and many having a voice recording when calls are made advising customers of the disputes scheme.
It may be that low awareness is due to people having little interest in wanting to know how to complain until they feel the need to do so. Encouraging people to read the salient points in a policy is challenging in itself, but if there are insights from where levels of awareness are high, then we should look at them closely.
The survey does tell us what people think constitutes fair treatment. Included in the top five are clearly explaining risks and benefits of products, being transparent and simplifying the small print so nothing is hidden, being treated as a valued customer and quickly resolving problems. This is where ongoing effort should focus.
Usefully, the research identifies a broad range of vulnerabilities which align with insurers’ own programmes. These include physical and mental conditions through to life events (e.g., family break-ups, disaster events), low financial resilience and capability challenges, such as English as a second language, and low confidence in being able to address unfair treatment, or in financial matters more broadly.
What stood out starkly was that half the adult population has at least one of these vulnerabilities with many having several. Being vulnerable is not a type of person, but rather people fall into and out of vulnerability depending on their circumstances. Vulnerability is a focus for the FMA as is making financial services available for all New Zealanders. Appreciating the extent of vulnerability, and the many ways it manifests itself, is an insight full of challenge.
A key barrier to the uptake of insurance is price. With inflation, reinsurance costs and other pressures having an inevitable impact on insurance premiums, there is no good news for consumers. The survey reports over 60% say inflation is increasing faster than their ability to save.
Insurers do have options to support those who face financial stress, but the costs hitting insurers are beyond their control. At the same time, insurers must price risk appropriately in the interests of all policyholders. So, although the news is not good, there is an obligation to explain what is happening and why.
A good explanation is critical in other areas too. For example, one in 10 report problems at claims time with the main concern being the time to resolve and settle. Waiting for resolution is a stressful time for consumers and often delays will be beyond insurers’ control when investigations must be carried out or supply chain issues occur. Keeping contact and ensuring customers understand the reasons for delay will not be the complete answer but will go a long way to managing expectations.
