Peter Smits: The cost of low prices and high expectations

The recent publication of figures by the Financial Ombudsman Service show that banks faced the most complaints about insurance (‘Banks top complaints table’, 15 September). And I can’t think of a better subject to reflect upon as Insurance Times launches Best of Brokers, its series focusing on independent brokers.

It came as no surprise to me that the banks featured heavily in the list of most complaints. However, some outside the industry might find it odd that not one broker, insurer or indeed aggregator featured in the top 10 generators of complaints about general insurance.

It can’t be pure coincidence that the businesses most complained about are those that sell insurance as an add-on or non-core activity and it begs the question of whether they apply the same amount of time and effort to compliance and regulation as do those of us who depend on it for our livelihoods?

Almost every day, we see clients who have been given bad advice in situations where insurance is the secondary purchase, from dealers looking to sell cars, to banks and building societies advising on mortgages. I can fully appreciate that the number of complaints will be directly linked to the number of customers you have. However, I can’t help thinking that these larger corporations and their ‘processes’ compound the complaint problem rather than attempting to resolve it.

My business doesn’t get many complaints. That’s not a boast, it’s a reflection of the way we conduct business. By choosing to contact a local independent broker, the client is entering into a relationship with a person who will assist them in the whole process. They recognise the added value we provide and are less price-sensitive.

The ‘production-line’ approach will add fuel to the complaint-and-claim culture that is so prevalent and which only intensifies the vicious circle of reducing price and increasing expectations, leading to claims and complaints.

Smaller, more personal, teams and organisations, which adopt a human approach, will not attract those clients who want to deal at arm’s length, with less connection to the product or service (also the clients who are most likely to want to claim or complain). A personal approach will defuse most complaints.

The insurance-buying public is becoming more knowledgeable about insurance. However, a little bit of knowledge can be a bad thing, especially if the advice it has been based on has not come from an insurance professional.

How is it right that these larger, faceless corporations can continue to sell insurance as a loss leader, breeding contempt among most of their clients who then believe it their right to complain about the very product or service they were so keen to pay less for? Either the clients’ expectations were too high or the features and benefits of the product were not explained before the transaction was processed.

The end result is that we pay for the mistakes of others. The general public is also more sceptical of anyone connected with insurance, making sales more difficult for all of us. To add salt to our wounds, we have to pay massive increases in our Financial Services Compensation Scheme fees. IT

Peter Smits is managing director of The Ashbourne Insurance Group.