Better service could save £80m a year, industry told

The insurance industry could save £80m a year by improving customer service, according to a joint report from the Chartered Insurance Institute (CII) and Ernst & Young.

The report, Delivering World Class Service, suggests that the industry is not providing good enough service to its mid-corporate customers, with 69% of brokers and 87% of insurers agreeing.

The industry spends £1.3bn a year servicing the mid-market (defined as businesses with turnover between £5m and £250m).

Andy Baldwin, industries managing partner for Ernst & Young, said: “£1.3bn is a major investment to make in any market but savings of £80m a year are hugely significant in current market conditions for insurers and brokers focused on the mid market. A new approach to cost-cutting across insurance focusing on the overall cost to serve, not just the individual costs of brokers, insurers and reinsurers, is needed. Now presents a perfect opportunity for insurers and brokers to work together to reap the benefits of redefining this market, delivering cost efficiencies and, most importantly, improving delivery.”

The report highlighted a number of factors affecting service. They were:

• Lack of a common definition of the mid-corporate segment by brokers and insurers, leading to duplication and waste.
• Insurers having been forced into driving complex risks into a commoditised operating model.
• Dual operating models between insurers and brokers failing to identify which party is delivering the customer service, and when.

Mark Radburn, chair of the CII’s broking faculty, said: “One of the key elements of the report is the requirement to improve our understanding of the customers’ needs. To make this achievable we would need adequately trained staff and a more professional approach towards customer service.

“The market needs to work together to improve professionalism and challenge ourselves to deliver world class customer service.”

The findings of the report will be discussed at the Biba conference later this month. The mid-corporate market accounts for about 25% of insurance premium in the UK. The market is worth £5.3bn and there are only 43,500 customers. The top 140 brokers control around 80% of the market, with the top 12 insurers controlling 88% of gross written premium.

CII and Ernst & Young plan to produce further reports looking at other segments of the insurance market.

The report polled polled senior insurers and brokers and 732 CII members. It can be downloaded from www.cii.co.uk.