Vol: 44 Issue: 2 | Aug 2021
When the two-year anniversary of the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry came around in February 2021, many Australian news outlets lamented how little progress had been made.
However, as new legislation rolls out, it’s all systems go for insurers — especially for their customer service teams.
‘Going back to the heart of the issues before the royal commission, it is clear that there were failures to appropriately respond to customers’ needs,’ says Bhrajna Kalaiya, a director in Deloitte’s Governance, Regulation and Conduct practice and an insurance sector specialist.
‘For example, claims handling issues highlighted in the case studies emphasised both the importance of certain moments for customers and the Australian Securities and Investments Commission’s limited ability to intervene.’
Customer service teams operate on the front line, and so they potentially have one of the most important roles to play in converting regulation into action.
‘Where insurers prioritise good conduct outcomes and effectively manage non-financial risk, they will be better able to comply with complex regulatory regimes in a robust manner that also fosters a positive culture,’ says Kalaiya.
Insurers in New Zealand have also closely followed the regulatory changes resulting from the royal commission. ‘A number of insurers operate in both New Zealand and Australia, so they’ve kept across what has happened,’ says Tim Grafton, CEO of the Insurance Council of New Zealand (ICNZ).
‘Around two years ago, the Reserve Bank of New Zealand and the Financial Markets Authority [FMA] undertook reviews of how life insurers and banks operate. General insurers also did a gap analysis and were required to present their findings and recommendations on conduct risk to their boards.’
The outcome of the reviews was the Financial Markets (Conduct of Institutions) Amendment Bill, which is currently in the New Zealand Government’s hands and going through targeted consultation with stakeholders.
Independently, ICNZ first developed a Fair Insurance Code for general insurers in 2006 and released a revised Code in March 2020. Grafton says: ‘It puts customers at the heart of what we do. We are also aligned with the FMA’s Good Conduct Guide, and after the Canterbury earthquakes, we worked with the Human Rights Commission on guidance for the prioritisation of vulnerable customers in a natural disaster.’
While the COVID-19 pandemic may have delayed regulatory reforms, it didn’t reduce increases to both compliance costs and the burden on compliance functions. ‘Insurers will need to invest in these support functions to meet incoming legislation and demonstrate that they are prioritising fair and suitable customer outcomes,’ says Kalaiya.
Importantly for customer-facing staff, the new Australian regulations require explicit consent, greater disclosure on both sides and a need to ensure customers understand their rights and responsibilities.
‘To reduce the knowledge gap or information asymmetry between customer and insurer, questions will need to be asked in a way that is clear and specific,’ says Kalaiya.
‘In seeking information from customers, open-ended, general or long questions that are difficult to understand or interpret must be avoided. Policy terms and conditions may need to be simplified.
For underwriting processes, simplification will require scripts to include questions which are clear and relevant, and staff will need to be trained in administering these questions.’
To address this, MetLife has developed its own learning platform — Claims Academy — for its 3,000-strong global workforce.
‘There are currently no minimum education standards in place for claims management, despite it being a highly skilled role at the heart of the industry. The new licensing regime will be a driver for improved competency,’ says David Campbell, chief operating officer at MetLife Australia.
‘Claims managers must master technical skills to make fair and accurate assessments, but they are also speaking with people every day who have been through life-changing, often traumatic experiences.
'These conversations can often be challenging, so our Claims Academy and broader learning framework are focused on improving both the hard and soft skills of our claims managers, bringing IQ [intelligence quotient] and EQ [emotional quotient] together.’
The current reforms are also not going to be the last. Grafton says: ‘This year, we expect there will be a full review of insurance contract law in New Zealand, which will no doubt highlight other issues.’
Another challenge, especially with intermediaries involved on the sales and claims handling side, is how far insurer responsibility extends.
‘One of the key questions is whether insurers should be accountable for outcomes that they don’t oversee directly — how can we transfer good conduct down the chain in the intermediated space?’ asks Grafton.
He says New Zealand insurers are already grappling with this issue, and customer service is often the department dealing with the fallout if things go wrong.
MOVING THE DIAL
In the United States, Steven Petruk, president of the Global Outsourcing Division at enterprise learning and outsourcing services group CGS, says the COVID-19 pandemic led customer care centres to abandon metrics such as call duration.
Instead, leaders encouraged service representatives to spend more time on the phone with customers.
‘While empathy has not been an operational performance metric in the past, it absolutely is a prime area of focus now and will continue to be,’ says Petruk. ‘Many companies are adding empathy-specific questions to their post-call surveys.’
Kalaiya says that monitoring and oversight of customer service teams will also need to be boosted. This ranges from monitoring frontline distribution staff to understanding the activities of claims assessors and third-party brokers.
‘Most importantly,’ she says, ‘we anticipate that there will be a shift in culture across customer service teams to respond in a timely manner and truly understand the needs of the customer.’
Grafton has definitely seen a shift in customer service among New Zealand insurers. ‘While each insurer is developing its own response, the whole direction of travel is customer-centric, and many New Zealand insurers had started well before the issues in Australia had come to light’ he says. ‘
'Already, many insurers have changed their performance indicators, remuneration and rewards structures, and outcome measures for customers.
Grafton adds that underwriters are using plain English policy wording, and customer service representatives are proactively retiring legacy products and migrating customers to the most current products.
SLOW AND STEADY
Jonathan Allan, chief marketing officer at customer service platform Puzzel, says customers sought reassurance from contact centres last year, when pandemic restrictions on face-to-face service applied. He expects phone customer service to remain the primary brand touchpoint in 2021, and possibly longer.
‘We’ll increasingly see the contact centre have full and official ownership of all inbound customer interactions, encompassing both operations and marketing, revenue generation and customer service,’ he told Forbes.
While the new reforms and upcoming Australian financial services licensing requirements are an immediate compliance issue for insurers, Campbell suggests there’s a bigger picture for customer service.
‘Securing a licence is one step,’ he says, ‘but lifting claims competency standards means we must ensure our customer-facing teams are equipped with the necessary mix of skills they need to deliver a positive, caring experience for the customer, and also that the process is as fast and easy as possible.
The focus is to ensure claimants are treated with empathy and respect and are provided support along the way.’
Kalaiya adds that insurers should also consider whether there are any potential strategic and marketing opportunities arising from the reforms. ‘Examples include opportunities to take the lead in adapting to new requirements, making the most of increased customer touchpoints to better understand their market, and publicising their new ways of working,’ she says.
While insurers have already made operational changes that are reflected in how customer service teams treat and speak to customers, it may take some time to see improvements in customer satisfaction surveys and retention data directly related to the new legislation.
‘These positive differences may not be felt by customers overnight, particularly in light of eroded trust following recent scrutiny,’ says Kalaiya. ‘However, a general uplift and greater connectivity between insurers and their customers can be expected over time, as a result of the reforms.’
MANY CHANNELS , ONE VIEW
Technology that gives an organisation a single view of a customer’s history is more important than ever, according to customer experience expert and author Adrian Swinscoe.
‘When customers contact a company using different channels, they don’t think they are having a series of separate conversations,’ he says.
‘They think they are having one conversation focused on trying to solve the one problem that is in front of them.’
Bhrajna Kalaiya, a director in Deloitte’s Governance, Regulation and Conduct practice, agrees. ‘Designing sustainable data and technology solutions that support regulatory change has proven to be one of the greatest recent challenges for insurers,’ she says.
‘There is a particular need for data and technology solutions that can help monitor customer and conduct outcomes.
‘Adapting to change means upgrades to system infrastructure and changes to the way data is recorded and collected. This will not be easy, but doing the work now will be beneficial for insurers over the longer term.’
TRAINING FOR BETTER OUTCOMES
For IAG, a virtual learning centre dedicated to risk and compliance training has proven vital in empowering its employees to make decisions that improve outcomes for customers.
IAG established the rQ Academy in early 2020 to increase the amount of risk and compliance training available to its 13,000-strong workforce across Australia.
The virtual learning centre was developed to complement mandatory risk and compliance training at IAG.
The additional education modules were designed to reinforce common risk management vocabulary and provide ways to better understand and embed key obligations to customers, such as those outlined in the General Insurance Code of Practice.
Manny Arabatzis, executive general manager — risk transformation and strategy at IAG, says the aim of the rQ Academy was to ‘build a more risk-aware culture’ amongst employees.
‘By introducing the concept of “risk intelligence”, or rQ, we’ve highlighted the ability to manage risk as a desirable personal attribute that can be trained like a muscle,’ he says. ‘The rQ Academy is the “mind gym” we’ve built to help people strengthen their decision-making muscles.’
Despite the challenges of implementing a new training program remotely during pandemic lockdowns, IAG is reporting a high level of take-up and overwhelmingly positive feedback, and not just from its customer service teams.
Arabatzis says rQ Academy is on track to have delivered around 25,000 hours of discretionary training to a large percentage of the business.
‘We know that everyone has a role to play in risk management, regardless of their day-to-day job,’ he says. ‘We’ve had a fantastic response from all IAG employees, including our customer-facing teams.’
The team behind rQ Academy was recently recognised as a finalist in ANZIIF’s Most Valuable Team Award as part of its Year of the Insurance Professional.
The Financial Sector Reform (Hayne Royal Commission Response) Act 2020 has resulted in a number of reforms rolling out across 2021. They impact every operating area of insurance, including the customer service team. Regulations that come into effect in October include:
- strengthened breach reporting obligations
- product design and distribution obligations
- hawking prohibitions
- Regulatory Guide 271 regarding internal dispute resolution system requirements
- deferred sales model for add-on insurance
- duty to take reasonable care not to make a misrepresentation