Insurance: A purpose for the profession

Publication date:

05 March 2020

Last updated:

18 December 2023

How to engage insurers with their job roles.

Introduction

The social purpose of insurance is at the core of what it does: paying claims at times of crisis. Every day insurers pay £37m in motor and home insurance claims to UK households, and in 2018 the Lloyd’s market alone paid £19.7bn in claims worldwide (ABI, 2017; Lloyd’s, 2018). The proportion of claims that are accepted as valid is also higher than most people expect: 98.4% of motor insurance claims in 2017, for example (ABI, 2017).

Insurance is key to sustained economic growth (World Bank, 2006). It is so important that access to insurance is often seen as a fundamental right rather than a luxury.

Despite this, customers and prospective employees can feel disengaged from insurance.

In the retail sector, there is intense competition over headline premiums (sometimes at the expense of quality), and this competition has intensified with the development of comparison sites. One strategy that firms can use in this environment to maintain both market share and profitability is ‘price walking’ (‘using complex pricing practices that allow [firms] to raise prices for consumers that renew with them year on year’ (FCA, 2019)). Price walking has, in turn eroded public trust.

Disengagement with insurance can also cause corporate customers to treat insurance as a procurement exercise, rather than using brokers and insurers to advise them on wider risk management.

Finally, issues like the sector’s large gender pay gap (Insurance Insider, 2019) make many prospective employees feel the sector is out-of-date and out-of-touch.

A Purpose for the Profession

To increase engagement with customers and employees the insurance profession needs a new purpose: to help people and organisations become more resilient as their circumstances change, through a blend of services that goes beyond traditional products.

This trend has already begun. In the retail space, professional brokers give tailored advice that addresses all their clients’ circumstances. Amongst providers, Vitality has positioned itself as promoting healthier lifestyles. Other insurers have helped make roads safer through telematics and campaigns for safer driving (ResponseSource, 2018).

In the wholesale market, managing the risks of the whole organisation has seen brokers reframing the conversation they have with clients, beginning with uninsured or uninsurable risks. This is key
in areas such as cyber risk, where an insurance product alone is not likely to mitigate the whole risk.

Building an Ecosystem

For the insurance profession to complete its journey to this new purpose, consistent action must take place at four levels: the regulator, the profession, firms and individuals.

• The regulator can enforce minimum standards and police the sector’s perimeter.

• Professional bodies can build communities of individuals who work together to achieve the profession’s purpose, through:

Creating a talent management strategy that is aligned with the profession’s purpose.
Encouraging firms to commit publicly to professional standards by joining an accredited scheme, such as Corporate Chartered Status (CCS). Firms committing to the CCS principles of nurturing knowledge, customer centricity and serving society demonstrate higher values that transcend the minimum standards set by the regulator.
Promoting good practice – for example, under its Insuring Women’s Futures programme, the CII has developed two pledges: the Inclusive Customer Financial Lives pledge and the Financially Inclusive Flexible Working pledge. It encourages insurance firms to commit to both pledges. Despite their initial focus on women as customers and employees, the final pledges and guidance recognise the interconnectedness of all people’s financial lives. These pledges are supported by good practice guidance and embedded within the CII’s existing ethical framework, providing firms with a visible objective that can align with their existing culture.

• Firms can define and realise their purpose in a way that creates a sustainable set of relationships between all their stakeholders, through:

A focus on what is commercially sustainable over the long-term (NFU mutual, for example, has an objective of ‘sustaining our business for current and future generations of members’)
Recognising the virtuous circle of better customer service and greater staff engagement, which is evidence strongly in work by the Customer Services Institute (Customer Services Institute, 2019)
Using their purpose as a currency for action – for example, by supporting projects that contribute to the organisation’s long-term purpose
Ensuring diversity among employees, to reflect the whole range of stakeholders that are served by the organisation
Having an appetite for bad news as well as good to keep the organisation true to its purpose

• Individuals often use their sense of professionalism for good, through engaging in their own development and looking for ways to deliver on their duty of care for customers.

Keeping the focus on outcomes

Once the ecosystem is in place, it needs to be refreshed through robust and meaningful feedback to ensure good outcomes.

This can take place at every level of the ecosystem, for example through:

The FCA’s ‘Financial Lives’ and ‘Live and Local’ programmes.
The Chartered Insurance Institute's Trust Index, which measures consumers’ experiences against expectations over nine key outcomes, defined by customers. They include: confidence in the policy to pay out, recognition of customer loyalty and respect for claimants. The index provides insights into what firms can do to improve outcomes for customers.
Senior management of firms increasing communication with customer-facing staff and giving them more autonomy. One element of this can be through creating flatter organisational structures.
Plugging into external programmes like Disability Confident, a government-backed programme that increases employment opportunities for disabled people.
These insights should be shared appropriately through regular exchanges between the regulator, the
Financial Ombudsman Service and practitioners.

Conclusion

Insurance delivers profound benefits to society, but its institutions are too often perceived as remote and out of touch by consumers and employees. This can be addressed by finding a new purpose for the profession: using the insights it has amassed over many decades to help individuals, families and organisations to anticipate changes in their circumstances. In this way, by addressing the needs of the whole customer, the insurance profession can build trust by fulfilling its potential to serve the public.