maglog

By Paul Nelson

When more than half of the world’s consumers don’t trust the insurance industry you know there is a reputation problem.

This finding from a 2022 Edelman Trust Barometer study was just one of a number of increasing concerns about the embattled sector aired at the inaugural Insurance News conference in Sydney in March.

While double-digit growth in premiums on the back of rising inflation and a slew of natural disasters haven’t helped the industry’s reputation, much of this damage can be sheeted back to poor brand communication.

Customers battling insurance affordability and availability don’t understand that increased exposure to risk comes at an increased cost. The fact that the industry manages more than 4 million claims a year with positive claims experiences for 90% of customers is lost on regulators and the media, who focus on the other 10%.

This means the industry is failing to attract smart young talent – especially women – at a time when technology will threaten current work practices. The good news is that clients of insurance brokers have much higher trust levels than large companies.

The Vero 2023 SME Insurance Index (undertaken by Brand Matters, which was acquired by Fuller last year) showed that small to medium business satisfaction with insurance brokers was at 78% – well above pre-covid levels. In this year’s survey it has soared to 87%.

This satisfaction is particularly strong among larger businesses which value the pivotal role brokers play in explaining risk management and being a specialist risk adviser, while simultaneously acting as a true customer advocate. The conference – which was something of a crystal ball summit – highlighted a number of global trends and issues that are affecting the future of the industry.

Changing technology: the industry suffers from ageing IT systems. Businesses are losing their competitive edge against faster-moving companies that are adopting AI and predictive modelling technology to manage risk. In this changing technology context many large insurers appear paralysed by the need to change and unsure where to prioritise. The industry has long had a reputation for being slow to act and cope with technology transformation and is struggling with the challenges of the sheer volume of information and data points, the need for automation of these data points to deliver cost savings and the increasing sophistication required to leverage both these elements.

Climate change: as one of the presenters at the conference highlighted, the increasing severity and frequency of catastrophic events has pushed up premiums by as much as 28% in some areas. In this new climate reality, insurers are distracted. How to define vulnerabilities in a rapidly changing climate and how to manage what are seen as solutions is the big challenge. For example, how does the industry respond to the desire of 85% of Australians to live near the coast, where they are more vulnerable to storms and floods? And how does it manage the boom in EV technology when unstable lithium batteries have an increased fire risk?

Regulation: regulators and politicians are increasingly frustrated with claims speed after catastrophic events. However, the sheer size of the workload after these disasters is beyond the capacity of most companies. Another presenter highlighted the Northern Rivers floods which created 224,000 individual claims in less than one week – an impossible task for existing teams. Technology and its ability to process claims more quickly has a huge role to play here.

Cyber risk: the insurance sector is a large holder of customer data and therefore represents a target for the global web of ransomware criminals. After Medibank Private and Optus, how prepared is the insurance industry for a breach?

Geopolitics: ongoing geopolitical instability is a chaotic environment for all industries, but with 40 countries undertaking elections in the coming 12 months, the geopolitical outlook is particularly unclear.

Regulators want insurers to have a clearly communicated internal culture around compliance, regulation and governance. This includes fairness and transparency around policy wordings, claims, timeliness – and where the matter is grey, erring on the side of the client. This includes reducing complexity within the transaction.

With this in mind companies need to set a clear purpose for their brands, beyond risk ratios, GWP and shareholder growth. This means accepting the challenge of re-inventing their businesses around their customers. They need to do a better job of explaining to their customers what they are actually buying. They need to proactively control their brand’s narrative. They need to reduce complexity across the insurance transaction with plain language, simplified graphics and the use of more contemporary explainer technologies such as video and animation.

They need to take a positive community education role, becoming a thought leader in the press, on radio and on social media. They also need to build a sharper employee value proposition that seeks to attract and retain the best and brightest young talent who will drive the insurtech revolution.

In tough and turbulent times, clients seek the security offered by a strong, clear brand. Now is the time to refresh yours.

Paul Nelson is Director of Consulting at Fuller Brand Management

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