Court of public opinion an urgent wake-up call for insurers
Reputational damage a challenge for an industry that has been failing to adapt to new conditions
Social media has become a curse for insurers. The Momentum bungle with claims last year and Old Mutual’s initial refusal before paying out the claim of an Atlantis woman whose husband was shot dead in crossfire in 2017 have opened insurers’ eyes to how damaging the court of public opinion can be to their brands.
Insurers have to take note, says Laurence Beder, lecturer at Wits Graduate School of Business.
“We have to start putting in place some serious thinking around crisis management. There’s only one room and it’s the truth. Brand reputation can get taken out in a minute,” says Beder.
Speaking at a Munich Re conference on how insurers can continue to resonate with policyholders, Beder said since players in the e-commerce space are increasingly using algorithms to track their customers’ buying activities — allowing them to deliver a tailored customer experience — the expectation gap in what financial services companies offer and what their customers want keeps widening.
However, only a few exhibit a sense of urgency in improving how they engage, said Beder, let alone handle insurance claims. “The likes of Amazon are using algorithms. Why are we not doing this as financial services companies?”
The only thing keeping the digital and e-commerce players from eating insurers’ lunch is the compliance burden in the insurance sector, Beder said. What makes matters worse is that insurers tend to focus more on financial targets in times of recession.
“It becomes more about ‘did we get the numbers’ and less about ‘did we become a better organisation from a customer experience point of view’. But there are few companies even in the financial services who are getting this right. One of them is Hollard and FNB,” he said.
The two companies have the customer-centricity built into their operating models while many others are stuck with models that seriously need to be renewed, Beder said, especially because it costs five times as much for those companies to get a new customer than to keep one.
Even though keeping an existing customer happy reduces operating costs, the last published annual report of the ombudsman for long-term insurance shows that 29% of complaints lodged by insurance policyholders in 2017 were resolved wholly or partially in favour of the complainants.
Likewise, the ombudsman for short-term insurance’s report shows R87.1m of complaints were resolved in favour of consumers in 2017. These are claims that were declined by insurers but the ombud offices found ought to have been paid.
Nico Conradie, CEO of Munich Re Africa, said reputation damage, especially as a result of social media, has become a significant risk for insurers. While reputation insurance is not something the reinsurance industry has explored to great lengths, it is playing more of an advisory role to help insurers deal with procedural challenges that end up affecting their efficacy and decision-making when handling claims and other matters that can potentially damage their reputation.
Conradie said reinsurers have had to reinvent themselves drastically over the past few years as drones and driverless cars turned upside down the nature of risks to insure.
Uncertainty in the nature of risks that insurers have to cover has increased the importance of reinsurance among insurers. Munich Re’s head of individual business, Filipe Nunes, said the company more than doubled its profits in the past 10 years while the value of its new business increased more than fivefold. Insurance companies buy reinsurance as their insurance to cushion themselves in cases of major claims events, such as big disasters.
In SA the company increased its gross written premiums to €521m in the 2017 financial year from €380m a year earlier. Conradie said cyberattacks and global warming, which is causing overflows in areas not prone to floods before are increasing insurers’ claims in areas never foreseen in the past.
“Reinsurers have to keep reinventing themselves. There is always a new challenge emerging.”