Increased regulation is no excuse for service decline, brokers tell insurers

Customer service

Survey shows insurers and brokers disagree over reason for customer service drop

Insurers should not use the compliance burden as an excuse for falling customer service levels, brokers have said, following a survey that shows carriers are failing to cope adequately with the more stringent regulatory approach.

Of 112 insurance brokers polled for information management provider EDM Group’s survey, 73% said they felt customer service levels have suffered in recent years because insurers have had to put so much resource into meeting the demands of new legislation and the twin-peaks regulatory system. In contrast, only 23% of 43 insurance executives questioned said this was the case (see pie charts).

RWA head of compliance Terence Clark told Post the survey reflected brokers’ concern about insurer service levels: “My brokers tell me insurers’ customer service is not getting any better. They are very critical of certain insurers, but they generally feel that customer service isn’t fantastic.”

However, while the figures show a stark divergence of opinion between insurers and brokers, Clark said the difference might not be due to unwillingness by insurers to acknowledge problems, but instead to “a lack of knowledge of what’s going on at the coalface”.

He added: “The brokers I deal with are having dialogues with local branches but it’s a question of whether comments from brokers are going right to the top. It’s important that these things get moved up the chain quickly.”

While Clark conceded insurers have “a lot to deal with that isn’t insurance”, he said the wave of regulation will not stop – with more requirements coming “not just from the [Financial Conduct Authority] but also from Europe”, meaning insurers need to think seriously about whether they have the necessary resources to cope.

Cost not to blame
Ashwin Mistry, Brokerbility chairman and incoming president of the Chartered Insurance Institute, said the cost of regulation was “definitely not the reason service levels have dropped”, instead attributing the decline to “the attitude of management and attention to detail by the general insurance sector”.

He told Post: “It’s about time people stopped looking for scapegoats to blame for the drop in service levels. It starts top down and then everyone else within the organisation needs to embrace it.”

According to Mistry, continued investment in training is key to tackling service levels: “It is about claims, underwriting, discussion with clients and email transcripts. If you have people who know what they’re doing, they can get to the nub of the problem and sort claims out in one hit. They can decipher and interpret the policy wording.”

James Sharp, director at Ten Insurance, said it was clear insurers “have to prioritise [compliance] because the regulator can shut you down”. However, he added that insurers using regulation as an excuse for service levels was merely a case of “looking for a diversion”. “It probably has to do with the number and quality of people they employ and how good their systems are,” he added.

Jelf Group chief executive Phil Barton said it was “natural” that insurer service had been impacted by pressure placed on firms’ business models. “In the economic climate over the past few years resources have been stretched,” he said.

However, while all insurers have been hit with edicts from Canary Wharf and Brussels, Barton pointed to a number of insurers he considered “first among equals”. “The organisation that has really turned around its claims performance over the past 12 months is Aviva,” he said. “It has really stepped up to the plate. The two organisations that consistently deliver exceptional claims service for Jelf are Hiscox and Axa.”

James Gerry, former CEO of JLT-owned Thistle and now chairman of GB Underwriting, agreed more stringent regulation had added significant costs in recent years, but said the key is whether regulation is effective – which he suggested is not always the case.

“The struggle is how to satisfactorily measure outcomes,” he said. “The temptation is to have a lot of people fill out forms and tick boxes, but that does not necessarily lead to a change in attitudes or behaviours. Despite what they say, the market has been very resistant to giving full disclosure on potential conflicts of interest, and that’s where [the FCA] needs to focus its efforts.

“What frustrates is if you think you’re paying [for increased regulation] but you can’t see any tangible flow-through benefit. I’m still waiting for the tangible result to come.”Customer service. The impact of legislation

 

This article was published in the 24 April/1 May edition of Post magazine.

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