Analysis by Broadstone of the latest Financial Lives Survey from the Financial Conduct Authority highlights opportunities for life insurers to improve policyholder understanding and increase engagement to enhance trust and create value.
Life insurance protection products form a key part of building long term financial resilience, however the survey indicates there is a gap compared to other general insurance products in terms of satisfaction with the product. The survey also revealed very low understanding of and engagement with their life insurance policy, while trust in their provider was lacking despite inertia driving long-standing product holdings.The findings present an opportunity for insurers to engage more with customers and create improved customer outcomes.
The key points on the life insurance market from the Financial Lives Survey include:
Low satisfaction: life insurance customers reported the lowest level of satisfaction (a score of 7.6) in their provider compared to other general insurance protection providers. Only 53% reported they were satisfied with their life insurance provider, compared to 73% for their contents insurance provider.
Low engagement: 26% of life insurance customers say that they do not understand their policy, compared to around 10% for other protection products. The FCA also notes that only one-quarter of people (25%) read their policy documentation in detail, compared to 39% for contents insurance.
Longevity: however, nearly four in 10 (38%) life insurance customers stick with their provider over 10 years with a quarter (24%) remaining with their provider for between 5 and 10 years, substantially more than for any other insurance product.
Trust: life insurers scored an average score of 7.6 among consumers in terms of how well they are trusted, unchanged from previous years, however over a fifth (22%) said they had low levels of trust and a further 20% did not know – the highest proportion of any insurance product, despite life insurance customers having the longest relationship with their provider.
Ewen Tweedie, Actuarial Director in Broadstone’s Insurance, Regulatory and Risk Advisory division: “The findings from the FCA reveal an opportunity to increase transparency, communication and consumer engagement. It finds many customers are unclear on the purpose or value of their life protection insurance leading to inertia, low levels of trust and satisfaction, and the potential to lead to poorer outcomes further down the line. Life insurance is a vital product that provides future financial security for families and loved ones if the policyholder becomes ill or dies, helping to cover living costs, debts or other expenses such as funeral costs. For consumers that understand the role of life insurance in long-term financial planning, it should offer peace of mind but this latest FCA data implies a market that is not functioning as well as it could be. For life insurers, there is a clear opportunity to gain brand trust and a competitive advantage if they are able to help customers understand the purpose of their policy and its benefits to them.”
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