​Industry issued customer service warning as market remains ‘competitive’

Insurance firms have been warned that they need to prioritise offering an “exceptional” customer service if they are to retain business.

David Lever, senior customer experience strategy manager at RSA, told Insurance Times that a strong consumer experience was a ”key differentiator in a competitive market” and could strengthen a firm’s overall position in the sector.

Lever made the comments after new regulations introduced by the FCA mean a service driven market centred around fair value is more important than ever.

For example, the FCA’s personal lines pricing rules, which came into force last year (1 January 2022), mean insurers can no longer differentiate on the price charged to homeowners and motorists based on whether they are new customers or renewing their policies.

And the regulator’s Consumer Duty regulation, which was introduced earlier this year (31 July 2023), sets out a slew of updated regulations that firms must follow.

Essentially, it requires insurance firms to review their products and services against a new standard of fairness.

Lever said that a focus on customer experience improves business performance, which in turn would position firms for success in the industry.

“Customer experience is a key differentiator in a competitive market,” he said.

“Providing an exceptional customer experience throughout the end-to-end customer journey will keep existing customers and attract new ones.”

Relationships

While Lever said that prioritising the customer experience should be a key focus, figures show the industry as a whole needs to do more in this area.

Earlier this year (15 June 2023), the Financial Ombudsman Service found 39,730 complaints were made about insurance between April 2022 and March 2023 – the second highest figure across the main financial product areas.

Lever explained that insurance firms need to recognise the value of retaining customers and building long-term relationships based on satisfaction and trust.

“This emphasis is driven by factors such as a fiercely competitive UK market on product and price, where satisfied customers differentiate insurers and may lead them to purchase additional products or recommend us to others,” he said.

“Retaining customers is also more cost-effective than acquiring new ones and customer satisfaction can help to improve reputation and trust.

“By prioritising customer satisfaction and loyalty, wise insurers aim to excel in customer experiences and strengthen their overall position in the market.”

’Customer retention’

This came after Catherine Carey, head of consumer strategy at consultancy Consumer Intelligence, told Insurance Times that a shift to a customer-focused approach can help insurance firms bolster their reputation.

“By prioritising customers’ needs and ensuring fair treatment, insurers can build loyalty and trust, leading to increased customer retention and new business opportunities,” she added.

Carey also said that with the Consumer Duty regulation giving customers the power to hold firms accountable if they fail to deliver on their promises, the ”empowerment can lead to a more resilient industry”.

“[This is because] firms are motivated to maintain high service standards to avoid potential consequences,” she said.

“The Consumer Duty can prompt improvements in the quality of products and services by incentivising firms to focus on customer needs and satisfaction.

“Regular market research can assist insurers in understanding evolving customer needs and adapt their offerings accordingly.”