With the Financial Conduct Authority(FCA) announcing its investigation into the selling of add-on products to insurance policies, the industry is coming under real scrutiny as the reborn regulator looks to stamp its authority.
Martyn Kyle, head of Insurance, SAS UK & Ireland, sees this as great opportunity for insurance companies to commit to better customer service and help put the ails of the past behind them.
Kyle comments "Following its restructuring, this investigation shows that the FCA is taking issues around the treating of customers fairly very seriously indeed, and it is up to the insurance industry to respond to this. Insurers are in possession of more customer data than ever before, which presents the opportunity to get closer to customers than ever before. With the rising use of websites and social media, insurers have the opportunity to learn more about their customer as a person rather than a policy. However this huge amount of data needs aggregating and understanding in a way not previously achieved in the industry. At the same time there comes a responsibility on insurers to ensure that they are using the data responsibly and not contravening international data protection laws.
Insurers can use big data analytics to harvest social media for further customer insight and can then make significantly better informed business decisions such as which customers they want, what actions will keep and acquire segments of customers and how to reach each customer in an appropriate and timely manner. With better customer understanding, insurers can improve both the retention and the profitability of their books. Insurers can reveal new insights from online customer behaviour, third party life stage and event-based information all of which adds to existing customer data and is, from my experience, typically yielding a 5 to 10% improvement in conversion and retention.
Rather than turning to complex add-ons and options that attract the regulators, insurers should be both leveraging available data to be pin-point accurate in aligning products to customers and perhaps managing their data more innovatively and efficiently to create more appropriate products for customers. Last year research from SAS undertaken by the Centre for Economics and Business Research found that the insurance industry could gain over £1bn in additional revenue through improving its customer intelligence. The economic opportunity, coupled with the boost in reputation should be enough incentive for insurers to focus on treating customers fairly and try and move beyond the stigma of mis-selling.”
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