Putting customers first makes business sense. It delivers positive outcomes for both financial organisations (including insurers) and customers, driving trust and loyalty. However, as much as a customer-centric mindset makes sense, it’s not something that has been enforced – until now.
On the 31st of July 2023, the Financial Conduct Authority (FCA) Consumer Duty rules came into effect – designed to fundamentally improve how financial service firms serve their customers. The Duty was established primarily to safeguard customers against misinformation and ill-informed financial decisions resulting from inadequate disclosure. However, there are other factors to consider.
To comply with the new rules, financial institutions (FIs) must review and potentially enhance their products and services to optimise each customer experience (CX). However, rather than perceiving compliance as a burden, insurers should embrace it as an opportunity. In this blog, we’ll explore the myriad of opportunities that await.
Regulations like the Consumer Duty may mandate that insurance companies adopt new technologies that allow for faster and more accurate claims processing and better risk assessment. These advancements can benefit customers (such as SMEs) by providing them with greater access to insurance products and services that meet their unique needs.
For example, event insurance is designed to offer comprehensive protection to individuals and organisations who are either organising an event or attending as a stallholder. Insurers must design innovative products that meet these specific protection needs. However, the focus is not solely on generating innovative concepts but also on recognising unfulfilled demands and markets and providing them to a broad range of small and medium-sized businesses.
Although short-term initiatives like updating current products and preserving current systems will be required, SMEs seek insurers who provide potentially disruptive products to help them sustain business growth and success. They are looking for simplification, efficiency and compliance in the buying process and service from a trustworthy provider.
Rule 9.18 of the Consumer Duty legislation dictates that to comply with the Duty (and remain competitive), digital experiences must not be unclear or confusing.
Insurers have vast amounts of data relating to customer demographics, claims history, and market trends. By using analytics tools and techniques, insurers can analyse this data to gain a deeper understanding of their SME customers, their needs, and the risks associated with insuring them. For example, insurers can use predictive analytics to assess the likelihood of a policyholder filing a claim and the potential cost of that claim. By analysing historical data and other factors such as economic indicators, insurers can identify high-risk policyholders and adjust their premiums accordingly. This helps them to maintain profitability while still offering competitive prices to their SME customers and providing a more tailored service.
New regulations like the Consumer Duty may require insurers to prioritise the needs of customers and foster long-term loyalty. It’s important to remember that the requirements of business owners can differ significantly so insurance providers must be flexible and tailor their services to the individual needs of each SME to offer a personalised experience.
Although this sounds like a huge task, data and analytics are crucial in helping insurers understand customer behaviour. Data-based personalisation can help accelerate the sales process, giving businesses back valuable time. For example, insurers can use data science and machine learning to enable analytic-driven matches between SMEs and products best suited to their needs.
Complying with new regulations is a challenging endeavour. However, insurers can achieve regulatory compliance and become genuinely customer-centric by enhancing CX, providing data-based personalisation and developing new products. This is a win-win for both policyholders and insurers.