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.
The customers that are 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 government 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 such as AI and predictive modelling will threaten current work practices.
The good news is that clients of insurance brokers have much higher trust levels than large companies. The Vero Insurance 2023 SME Index (undertaken by BrandMatters which was acquired by Fuller last year) shows that small to medium business satisfaction with insurance brokers is at 78%, well above pre-COVID levels. This satisfaction is particularly strong amongst larger businesses who value the pivotal role they play in explaining risk management and being a specialist risk adviser, whilst simultaneously acting as a true customer advocate.
“This is a testament to the strong relationships that brokers have with their clients and serves as evidence of the value of the profession to Australian business,” the report says.
Macro issues
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, which were frequently bolted together as acquisitions occurred over time. These 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, legacy insurers often appear as “deer in the headlights” 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 highlighted at the conference, 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 as they build a view across risk ratios and what risk is acceptable or not. 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 by 85% of Australians to live near the coast when it is more vulnerable to storms and floods? And how does it manage the boom in EV technology when unstable lithium batteries may have an increased fire risk?
Regulation
Government 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 for example the Northern Rivers floods which created 224,000 individual claims in less than one week which is 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 ransom-wear criminals. After Medibank Private and Optus, how prepared is the insurance sector for a breach?
Geopolitics
The ongoing geopolitical instability of wars in Europe and the Middle East is a chaotic environment for all industries but with 40 countries globally undertaking elections in the coming 12 months, the geopolitical outlook will be particularly unclear.
Implications through our lens of brand communication
Regulators are looking for insurers that 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 the inherent insurance product complexity within the insurance 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, clearer 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 right 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 (EVP) that seeks to attract and retain the best and brightest young talent who will drive the insuretech revolution.
In tough and turbulent times, clients seek the security offered by a strong, clear brand.
Now is the time to refresh yours.