A very popular management guide, Leadership Secrets of Attila the Hun, written by Wess Roberts in the late 1980s, contained reflections on leadership that formed the core of many a management course.
Some of these may well apply in today’s business world.
“The first responsibility of a leader is to define reality. The last is to say thank you.”
These thoughts find application in the 2021 Customer Satisfaction Index for Short-term Insurance, conducted by Consulta. The media release notes that “…the industry collectively has some serious challenges ahead to meet in changing customer perceptions of value and quality, and meeting increasingly higher customer expectations.
“The short-term insurance industry is facing an increasingly critical customer when it comes to service delivery, meeting expectations, quality, value, and price. Customer loyalty is on the decline, and short-term insurers are struggling to articulate their customer value proposition and differentiate across all the cross-functionalities of their service offerings.”
The survey shows an industry where competition between players is fierce, and where only two insurers emerged on an industry par score for overall Customer Satisfaction, with all others performing below par in the Customer Satisfaction stakes.
I do not intend sharing any of the rankings, as I believe the validity of the survey is flawed, but more about that later.
Consulta notes that, although the index differentiates between direct and intermediated insurance models, it is also important to note that all short-term insurers compete for the same customers regardless of their distribution models. And this is where my problem starts with the survey.
If you have only one direct insurer, with what do you compare its outcomes? It’s like saying the twins look very alike, especially one of them. In addition, the one used in the survey has a database of clients mainly sourced from a homogenous group. The glaring omission in this specific sector is Outsurance, certainly the biggest player in this sector, and the direct insurer that has “price” in its name.
Only six intermediated product providers took part in the survey. Notable omissions include Santam, the biggest insurer, Hollard, a major player, and Discovery, which claims to be the fastest-growing provider in the non-life sector.
It is therefore very difficult to understand what value there is in the outcomes reflected in the report.
Some generic comments
“It certainly seems that any goodwill the industry built up in the initial stages of the pandemic in terms of payment holidays, premium discounts, and restructuring of client portfolios at a time when millions of South Africans found themselves in financial distress are now moot. More consumers increasingly view insurance as a grudge purchase rather than an enabler and safety net, more so in the stressed economy.”
One must consider the impact of the negative media exposure afforded to the initial refusal to pay contingent business interruption claims, as well as efforts by the industry, and particularly those who suffered reputational damage, in countering this.
“Overarching themes that emerged in this latest SA-csi for STI was the importance of value for money, a lack of perceived quality or differentiation, significant increases in complaints incidence, and as a result, a decline in customer loyalty,” explains Abigail Boikhutso, chief executive of Consulta.
“Of concern is the general increase in customer complaints across the industry and a commensurate decline in complaints handling and resolution. Short-term insurers will need to find and address the service and product delivery shortfalls to customers, who show an increasing propensity to take their business elsewhere if left dissatisfied,” adds Boikhutso.
Of particular importance here is the significant increase in the number of claims based on false hope, if not fraud, rather than fact, due to financial hardship. Naturally, those people would feel disgruntled.
“The playing field has been heavily slanted to price above all other measures, a very challenging space to play in. Legacy, brand sentimentality and track record are proving secondary in a heavily contested space where there is very little growth… Aspects such as quality of service, product benefits, value and price will increasingly become the measures that customers base their decisions on as they perceive there to be minimal real differentiation coupled by a poor customer experience.”
Experience has shown that where price is the deciding factor, dissatisfaction is quick to follow, particularly as underwriting in such cases are done at the claims stage. Remember the old, disjointed slogan? “We don’t hassle, we don’t pay.”
Managing perceptions and expectations
A second Attila the Hun musing states: “A Hun’s perception is his reality.”
“Perceived value is a measure of quality relative to the price paid and plays a significant role as the economy bites into household incomes. It is essential that short-term insurers educate consumers about the importance of insurance as an enabler and financial safety net, especially so in tough economic times.”
Managing customer expectations will be key to staying competitive in a fiercely contested market. The life industry, in contrast to the non-life sector, emerged from the pandemic with an enhanced reputation and record claims pay-outs in both numbers and amounts. But then that is an entirely different ball game. You cannot question death.
What does the future hold?
“It is interesting to note that there was a marked increase in customer expectations from the time that the pandemic broke, indicating that customers place high expectations on their insurance performing as expected in times of financial distress and upheaval.”
We have recently seen that reinsurers are reviewing their stance on several critical issues in the wake of the Covid pandemic to avoid being caught on the wrong foot again. This led to insurers being forced to withdraw such cover, as they are unable to foot the potential bill themselves. Also read: Old Mutual joins move to limit cover for non-physical damage on BI policies.
The importance of the intermediary in this critical area cannot be overstated. It is a given that the knowledge and experience of the average adviser far exceeds that of a call centre operator, where high turnover comes with the job. We should use this to our advantage.