CII findings suggest "every insurance claimant should be treated as vulnerable"

The CII has published a summary of findings from its recent ‘Road to Consumer Trust’ roundtable, which explored how firms, practitioners and other stakeholders can collaborate to raise the standard of care offered to insurance policyholders following the introduction of the Consumer Duty.

The roundtable brought together representatives from the FCA, consumer groups, the CII’s professional communities and Professional Standards Committee, and was informed by a CII survey on the perceived impact of Consumer Duty on organisational culture.

The summary document sets out progress made, challenges which remain, and a series of potential interventions to improve customer outcomes, including the suggestion that ‘boards and leaders need to walk in the shoes of customers – see and hear real personal stories when it goes well and where it goes wrong’.

The summary is focused on themes including conflicts of interest; data, technology, AI and governance within firms; inclusivity and vulnerability; accessibility and addressing unmet needs; leadership and culture; and consumer empowerment and transparency.

This article explores the key themes explored in the summary, and takeaways for insurance firms looking to drive up standards of care for policyholders in line with the Duty.

Key takeaways

The summary report is written around a series of themes, including conflicts of interest; data, technology, AI and governance within firms; inclusivity and vulnerability; accessibility and addressing unmet needs; leadership and culture; and consumer empowerment and transparency.

Themes & Suggested interventions

Conflicts of Interest & Incentives

The report suggests that a firm’s purpose and vision should be aligned with driving forward the Consumer Duty, specifically via the delivery of good customer outcomes, and that this should be reflected in its action and rewards structures.

Suggested interventions include ensuring that reward and recognition policies incorporate and incentivise ethical behaviour and delivery of good customer outcomes, beyond focusing on rewarding and renumerating financial performance. The report acknowledges that role such as claims may be disproportionately less well-remunerated than those such as sales, which are focused on revenue growth, despite the former being critical.

The report also suggests that there could be increased awareness and training surrounding how improving good customer outcomes could deliver commercial benefits, i.e. improved firm reputation.

Data / Tech / AI and governance within the firm

The summary notes that as technology advances, boards need greater visibility and understanding of third-party, supplier and supply chain relationships for data and tech to be able to use these tools to build consumer trust and effectively oversee and challenge data ethics. The report suggests that leadership within firms should have sufficient visibility, expertise and ability to challenge outcomes that may occur within a supply chain, such as outsourced data / algorithms.

Noting the potential for AI and automation to pose challenges to fairness and transparency due to the complexity of the insurance chain, and risk of ethical standards being applied inconsistently with varying outcomes, the summary recommends firms focus on accessing the right data to allow them a better understanding of consumer experiences and outcomes.

The summary notes that: “Data should go beyond compliance and be used to challenge assumptions, improve customer service, and drive continuous development”, emphasising that the increased efficiency and productivity that accompanies advancements in data, analytics and technology should not be prioritised over driving good consumer outcomes, or preclude thorough and responsible oversight.

Inclusivity and vulnerability

The summary noted that ‘some firms still struggle with defining / identifying vulnerability; despite recognising that at the time of a claim most customers are in a vulnerable position’, noting firms’ own bottom-up assessment of the proportion of customers presenting as vulnerable typically presents as much lower than the 47% indicated by the 2022 FCA Financial Lives survey.

The summary suggests firms should carry out bottom-up and top-down assessments of vulnerability across relevant interactions with customers to compare and contrast whether outcomes differ between vulnerable and non-vulnerable customers, enabling firms to design strategies which address vulnerability when it arises. It is also suggested that if unable to undertake top-down assessments to understand vulnerability across their customer base, firms could use the FCA’s Financial Lives survey data as a benchmark of vulnerability by sector.

Notably, the summary suggests ‘every insurance claimant should be treated as vulnerable by default as they are often in stressful situations and lack insurance expertise’; it also calls on the FCA to be more prescriptive in defining vulnerability.

Other suggestions included training and incentivisation of empathy, listening and support skills, and ensuring accessible policy and communication language.

Accessibility and addressing unmet needs

The summary notes that due to many firms focusing on their existing target customers, and comparison websites and direct channels replacing the use of brokers, there is a risk that consumers will be marginalised, underserved and information asymmetry will increase.

The summary recommends greater collaboration between profession, policymakers, regulators, 3rd sector, consumers to assess the impact of unmet needs and what would work to reduce them, greater signposting of appropriate solutions for those outside an individual firm’s appetite, and increased consumer awareness of how insurance works, the different organisations involved, and when each could best respond to their needs.

Consumer empowerment and transparency

The summary underscores that consumers may struggle to assess quality at purchase, renewal or claim, and lack the ability to penalise poor quality service. In addition, the summary notes that product descriptions are often not accessible for customers, and typically focus on coverage, meaning it is hard for customers to recognise whether they have experienced a good outcome/service; for instance, customers may not be able to establish what is a reasonable time for a claim to be settled.

Subsequently, the summary recommends increased guidance on what good looks like, the standardisation of product description, and provision of simple claims scenarios to aid consumers in making informed decisions. In addition, the summary suggests firms establish benchmarks for claims settlement times and service quality and that these are communicated to consumers.

Leadership and culture

The summary notes that some firms’ approach to meeting Duty requirements involves a focus on satisfying minimum reporting requirements, short-term. Instead, the summary recommends boards/leaders thoroughly ‘reflect on and delve into real consumer experiences, not just data trends’ and ‘embed a curious, listening culture where feedback and consumer insights genuinely drive strategy and business decisions without fear of regulation or reprimand’.

Ultimately, the summary echoes sentiments reverberated throughout FCA reports and reviews concerning firms’ implementation of the duty: that data collection and analysis should be purposeful, provide actionable insights, and that firms should embed a culture that genuinely strives to drive forward good outcomes and the ethical ethos of the Duty.

Specifically, the summary recommends firms have a strategy for ‘improving data transparency, outcomes accountability’ and empower all staff across supply chains ‘identify root causes and innovate’ to deliver good customer outcomes.

The summary also echoes the FCA in emphasising on the importance of leading from the top, recommending firm leadership has a clear vision of how culture will deliver good customer outcomes, and ensuring that ethics is driven as ‘a strategic aspect of business and governance’ as well as ‘behaviour at an individual level’.

Focus on minimum standards / lack of benchmarking

The summary notes smaller firms may require greater support in moving away from a focus on satisfying minimum standards of compliance with the Duty in order to drive forward better consumer outcomes.