FCA helps insurers focus on what matters most

16 May 2017

By Kareline Daguer 

Insurers will be the first to admit they have been going through an existential crisis for a number of years now. The value insurers offer to clients and the quality of their products and services continues to be scrutinised, together with warnings of some powerful disruptors shaking up the sector. In light of this, the Financial Conduct Authority (FCA) is doing insurers a favour by keeping the focus on customers in its annual business plan published in April.

Insurers have now had time to digest the FCA’s business plan, and have found that it doesn’t hold many surprises for the sector. We expect to see continuing work on ensuring the fair treatment of existing customers, the review of the pensions market in light of pension reform with proposed remedies to help consumers, and more work on governance over distribution chains and preparations to apply the Insurance Distribution Directive early in 2018.

So, for many this agenda will read like more of the same. In uncertain times like this, getting consistent, clear messages from the regulator is good for the industry. Some issues will require time to get to grips with the full implications, and even longer to come up with effective solutions. The FCA seems to have taken that on board, which is helpful.

Why is the FCA being helpful to the insurance industry? The areas singled out by the FCA are fundamental to the success of any insurance business in the long run:

  • making sure the products offered are relevant and appropriate for customers throughout their life cycle
  • considering the value added by distribution chains and ensuring products are offered to the right customers for the right reasons
  • treating existing customers as you would treat new ones.

The good news is that designing and selling insurance products that are relevant and beneficial to customers is the only way for any insurance company to maintain and improve its market position.

Technology offers fantastic opportunities for firms that are willing to take up the challenge of exploring how they can leverage robotics, artificial intelligence and big data to offer the best products. Used in the right way, technology can lead to better and cheaper advice, products more tailored to the needs of the customer and more choice and lower prices in a competitive market.

In our latest Global CEO Survey we found 73% of insurance CEOs have changed their people strategy to reflect the skills and employment structures needed for the future, well above the response rate for other financial services sectors. They recognise the need to be more innovative and make the most of the technological changes ahead. Sixty-one percent of insurance industry leaders are already exploring hybrid technology where human and machines work together.

I believe the FCA’s agenda goes hand in hand with the technology opportunity and firms should consider both together to maximise the chances of success of any given product in the market. Building and maintaining the trust of customers is a long game, but then insurance is a long business and industry players that look far enough ahead are more likely to build the foundations for a healthy future.

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