The Greatest Challenge Facing Insurance
There is a crisis of trust in insurance. Worryingly, the trend slopes downward – the more consumers experience and learn about insurers the lower their trust. What’s going wrong?
The Chartered Institute of Insurance has some brutal news for the profession. You might think this is shocking. Just one in five customers across the United States, the United Kingdom, France, Germany, Italy, Japan and Switzerland consider insurers trustworthy. In the UK, two-thirds of consumers believe their insurer will do what it can to avoid having to hand over money. A remarkable figure, given 98% of claims of most categories are paid out. Only 17% would follow their insurer’s recommendation to update their payment plan – a wholesale rejection of the insurer as an reliable source of information.
Under-insurance is the prime symptom. In the UK one in four homes has no form of home insurance. In London the figure is 45 per cent. Fewer than one in three Brits has life insurance. It leaves families unprotected and vulnerable.
Low trust is also perilous for insurers. Consumers with a low sense of trust exhibit are flighty. Brands must compete on price, leading to wafer-thin mark-ups on policies with budget-grade coverage.
A Geneva Association survey points to low trust across generations. The survey covered 7 major economies, and found only quarter to a fifth of respondents were prepared to say they trusted their insurer. Worryingly, the trend slopes downward – the more consumers experience and learn about insurers the lower their trust.
This lack of trust may be attributed in part to a wider dissatisfaction with financial services. The Edelman Trust Barometer 2020 places financial services bottom of the league table of economic sectors, trusted by 57% of consumers.
Naturally, financial services have improved trust levels since the 2008 crisis – the data shows steady year-on-year increases in trust since the nadir, up +12 over the last eight years alone.
So what’s going wrong? A FintechOS whitepaper takes a deep dive into the root causes of the lack of trust in insurance. It also spells out the remedies. We’ve talked to leading companies from incumbents and start-ups, to accelerators and consultants, to get to the heart of the question for this report:
- “You can have all the facts and figures, all the supporting evidence, all the endorsement that you want, but if you don’t command trust, you won’t get anywhere.” – Naill Fitzgerald, former chairman, Unilever
- Today the industry is struggling to find this magic touch
- Swiss Re estimates only half of catastrophic losses in 2018 were covered by insurance – the rest was paid by individuals, firms, and the government
- In order to regain the trust of consumers, insurers need to upgrade legacy systems to the point where innovation is possible. Currently, the gap is huge.
- If traditional insurers want to rebuild trust with consumers, as insurtech companies are doing, they need to adopt cutting-edge digital technologies.
For more findings from our whitepaper, ➡️download from here: https://bit.ly/34slCM9. Stay tuned for more.
(to be continued)
This article is part of a series of FintechOS articles on the insurance industry. For more findings on insurance, ➡️download our whitepaper: https://bit.ly/34slCM9.
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