According to a recent South African Customer Satisfaction Index1 (SAcsi) survey, trust and delivering on promises are the two key satisfaction criteria when it comes to choosing a life insurer, rated even ahead of cost. The two are synonymous with each other. When we don’t deliver on our promises, we erode trust. And when we do deliver, we build trust. It’s as simple as that.
So, why then has the financial services industry been rated as the least trusted business sector for ten consecutive years in the global Edelman Trust Barometer study (since its inception)? What drives this negative perception?
In the insurance industry, not delivering on promises equates to not paying claims. When we take a look at FMI’s 2019 Claims Report, the key reasons for non-payment of income protection claims was due to a combination of non-disclosure, the claim duration being shorter than the waiting period and general policy exclusions. This points to a lack of policy understanding on behalf of the policyholder.
Customers often misunderstand what they are covered for, which invariably leads to dissatisfaction and frustration at claim stage, and erodes trust.
Policyholders very rarely read their policy documents. The insurance industry is bound by legal requirements to cover all information regarding the use and licensing of a product. However, statistics from a Deloitte survey in the United States found that 91% of people do not read their terms and conditions, largely due to the length of the documents.
This is where the industry relies on the support of Financial Advisers to ensure their clients understand the cover they have. According to an article in BusinessTech2, “intermediated insurance companies do better than direct insurers in meeting and exceeding customer expectations – this is put down to the importance of the advice process and helping customers understand exactly what they are covered for – and not covered for – and managing customer expectations at inception of cover and not at claim stage.”
When it comes to income protection cover, there are four key areas that an adviser needs to help their clients’ understand at application stage, to ensure a positive outcome come claim stage.
- Protecting 100% of your clients’ income and keeping their policies up to date in line with their annual salary increases. When it comes to income protection, being underinsured will likely lead to disappointment at claim stage if your client’s pay out doesn’t sufficiently cover their monthly expenses.
- Ensuring your clients understand the cover they have. For example, many customers are unaware that disability lump sum benefits only pay out in the event of permanent disability.
- Ensuring your clients have both temporary and extended income protection. Many customers opt for only temporary income protection benefits, believing their disability lump sum cover will be sufficient should they need to claim for more than 24 months. But not all long-term claims are permanent. As an example, 40% of FMI income protection claims which last longer than a year are not permanent3. This scenario would leave a client without any cover at the end of their temporary income protection benefit term.
- Ensuring your clients choose the shortest waiting period possible and understand what a waiting period means. In many instances, clients are unaware of the waiting period on their policies and are disillusioned when they discover they won’t receive any income during the period they’re booked off for. Nearly two-thirds of all FMI’s claims last less than 30 days, and yet more than 60% of clients have chosen waiting periods of 30 days or longer3. This could also be due to the fact that many clients think their waiting period refers to the period from inception of cover to when they can claim, rather than the period they have to be booked off for before they can claim.
As an adviser, your knowledge and guidance can make all the difference to your client’s claim experience and will help in closing the trust deficit within our industry.
1The South African Customer Satisfaction Index (SAcsi) is an independent national benchmark of customer satisfaction of the quality of products and services available to household consumers in South Africa.
2BusinessTech article dated May 2020 and titled South Africans don’t trust insurers to have their backs
3FMI 2019 claim stats