Communications to customers

FCA: Improving customer communications

In 2015, the FCA (Financial Conduct Authority) explored smarter approaches to communication in the light of changing technology and new insights into consumer behaviour. This paper looked at changing mindsets in delivering effective customer communications. The FCA acknowledged that many firms are trying to comply with expectations around transparency and information, but set out several areas for improvement:

• Terms and conditions
• Fees and charges
• Marketing/promotional material
• Product/service information

The FCA argued:

"Communications play a fundamental role in helping consumers to make informed decisions. Effective, engaging information can be a key tool in promoting effective competition to supply products and services that consumers want. Greater transparency in firms’ communications with consumers can also lead to greater efficiency for the industry, with less time spent handling complaints."

Researching smarter communications

The FCA identified a number of common behaviours among firms or perceived barriers that were limiting the development of effective communications. These include:

• firms adopting a 'risk-averse' approach to communication design, by using consumer disclosures as a risk management tool to mitigate potential action against the firm;
• EU and domestic legislation leading firms to produce jargon-filled and lengthy disclosures;
• costs and operational challenges of changing existing communications outweighed the benefits; and
• firms treating communications about products and services as of secondary importance compared to the design of the product or service.

When considering how to improve their services, bearing in mind the FCA’s guidance, firms should:

• understand and recognise the importance of communicating effectively with consumers;
• create product and service information for consumers with at least as much behaviourally informed creativity as is applied to business development, marketing and financial promotions; and
• create communications as an integral part of the product or service design process.

Adopting smarter communication practices will allow firms to be forward thinking rather than waiting for current communication methods to become outdated. By looking at good practices from other countries, firms can observe and become involved in opening conversations with other financial services.

Communication options

When thinking about how to deliver content, always put the customer first. This means not treating everyone the same. Therefore, content delivery needs varied methods and formats rather than one standard paper document. By evaluating the current environment, firms should be developing channel strategies that think beyond a one-size fits all approach when delivering content. Effective strategies could include:

• Identifying customer segmentation and customising communication styles accordingly
• Creating a diverse portfolio of products
• Improve accessibility to products (eg emails, downloadable documents, mobile apps, telephone services and in-person availability)
• Time the delivery (communications should be delivered at effective times where an audience will be at their most responsive, eg email and social media posts)
• Content comes first (communications should not be secondary to the product design, eg appropriate images, white space, layout, etc)

Testing existing as well as new processes will allow firms to see what their customers respond to the best. The most effective forms of testing observe how consumers respond to communications in real-life situations, were key information is consumed in an environment with numerous distractions, and real-life behavioural biases are at play.

Things to consider

1. Use simple language.

Avoid technical jargon and any complicated terminology. As well as on websites and marketing materials, insurers also tend to use language that can alienate or confuse their clients. The tone of your phone conversations, emails you send to clients, renewal letters, your website and even your social media posts should all feel consistent and explain things clearly to the client in terms they can understand.

2. Research new methods.

With new communication technologies to consider, understanding new ways to talk to consumers can be just as important as the content. Researching what customers respond to as well as methods that you can best engage them with can be equally effective. Consider the following:

• Call listening: See what communication styles are effective and if any use of jargon alienates customers.
• Networking events: Speak to other people to observe how other people discuss insurance in their own words.
• Focus groups: Test to see the reactions from a range of people concerning your language and formats of delivery through surveys and new templates.
• Social media and online forums: See what language and concerns clients have when discussing insurance with each other.

3. Respond to feedback.

Avoid rigid processes that can’t be altered. You should be constantly researching and testing communication methods so that your content style doesn’t become outdated or stale. Testing sessions are a good way of seeing how well people interact with content. However anything implemented should also be monitored to see how durable it is on a long-term basis. Testing new ideas can also inform the regulatory approach if effective means are discovered, leading to consultations on rulebook changes.

When developing a piece of communication for the first time, ensure that you test a wide range of potential solutions. Testing often takes place at the end of a design process, when many key decisions about the form and content of a piece of mandated communication have already been made. This is particularly true of regulatory decisions that may have to go through several legislative or regulatory process before they are finalised. Leaving testing towards the end of the process means the tests simply serve to validate rather than inform key decisions. 

4. Avoid 'risk-averse' compliance.

Design regulation in a way that discourages over-use of terms and conditions and avoids an ‘info-dump’ of all eventualities just to avoid litigation. Information should allow consumers to make informed decisions. Products and information should be designed for easy understanding and comparison. Essential information such as key benefits, features and fees should be clearly displayed. Supervisors can encourage a stronger culture of communication by avoiding an overly-strict approach to standardisation, and by focussing on good product governance, rather than a culture of poor product governance mitigated by an over-reliance on risk warnings.