How insurers can build on their consumer communications

Amid the current cost-of-living crisis, home insurance premiums jumped by more than a quarter (28 per cent) over the 12 months to 31 March 2023 — raising fears that some Australian consumers may abandon their policies altogether, according to a recent report by the Actuaries Institute.

In this environment, insurers should consider how they can better communicate the benefits of coverage to consumers, says Computershare’s head of communications consulting, Computershare Communication Services Tonia Hetherington.

Like other financial product providers, insurers currently meet their legal requirements for communication with consumers via their product disclosure statements (PDSs). But these documents are often more than 100 pages long and the percentage of people that read them is very low.

Hetherington says almost half of the respondents in a Computershare survey admitted to skimming over essential communications relating to finance, wealth, insurance or utilities. Likewise, the Australian Securities and Investments Commission (ASIC) has found that only one in five people read PDSs.

PDSs can also be difficult for a large section of the population to comprehend.

“In this country, an estimated 18 per cent of the population have a disability, an estimated 10 per cent of people are dyslexic and about 44 per cent of adults read at what is considered a low level. More than half a million people are vision impaired or blind, so there are so many people who might potentially struggle with such documents,” says Hetherington.

Many insurance PDSs also have tables that screen readers — an important tool for the visually impaired — can't read.

Promoting a better understanding of the PDS

It should come as no surprise that some consumers consider a PDS to be a document that safeguards insurers, rather than something that imparts knowledge.

“ASIC and other regulators have for a long-time recommended providers become more innovative to promote better product understanding,” says Hetherington.

“They want interactive experiences for consumers — for example, where the PDS would include a progress bar to highlight where you’ve absorbed the information, hyperlinks, and HTML formats, so long as the PDS is either saveable or has continual access. They even support gamification.”

It can be challenging to change the status quo, especially when producing the PDS involves interaction from different departments — communications, underwriting, IT and legal — across an organisation.

“Rather than taking a purely legal and compliance-driven approach to developing the PDS, insurers can drive improved customer engagement by catering to the different learning styles of their customers,” says Hetherington.

Offering personalisation

However, as many financial service providers are increasingly able to offer their customers more tailored personalisation, the insurance industry has a lot to gain by adapting and innovating.

Providers could look to create personalised HTML PDSs for each customer, alongside a downloadable printed version. 

They could also look to Europe, where some PDSs include embedded videos to communicate key points, with captions for screen readers. Or insurers could consider new ways of using graphics, along with descriptive alternative (alt) text.

“I think the regulators provide guidelines about what can be done and there is plenty of relief available if insurers want to do something innovative,” says Hetherington.

“We've got the technology to change the current status quo to help enable providers to provide different disclosure versions.”

The drive towards plain language

Hetherington says one step the industry could take to improve the way that important information is imparted to consumers is to move to more interactive documents rather than the current rigid PDF structure. 

“That would be a big leap forward. An interim step would be to change the PDF, so it aligns with people’s motivation to understand information,” she says.

“Insurers can gain an advantage in the market by using simple language that makes it easier for the customer to understand key terms and concepts.”

If insurers want to communicate with a more diverse range of consumers, Hetherington says that this will require greater empowerment of the communications teams within organisations, along with bigger budgets being allocated to those teams.

“In our experience, insurers who create cross-functional teams to manage essential comms achieve greater personalisation and also demonstrate an understanding that their customers are likely to absorb information in different ways.”

Staving off the trend to drop insurance

As the cost of living continues to bite, many consumers are reconsidering their insurance coverage.

A recent McKinsey survey of thousands of North American consumers found that close to 40 per cent of insurance holders who considered cancelling their policy were doing so because it did not provide sufficient value or was unnecessary. Hetherington expects similar trends could be observed in Australia.

“As churn increases, there is the opportunity to do more to help consumers understand the value of the service they’re receiving,” she says. “There is a lot to be gained from stepping up to that challenge.”

Tonia Hetherington will be presenting the ANZIIF Webinar: Protecting Consumers with Accessible Disclosure on Wednesday 22 May 2024, 12 pm–1 pm AEST.

Register for the upcoming ANZIIF Webinar