By Katie North-Walker, Senior Consultant, Myles Pink, Partner at LCP and Lynne Rawcliffe, Trustee Director at Law Debenture
This has become even more important over recent years, with the majority of buy-outs including large numbers of deferred members who are yet to make decisions on how and when they take their benefits, requiring more interaction with the insurer.
Underpinning trustees’ focus on member experience is an evolving regulatory landscape. The recently introduced requirement for insurers to adopt the FCA’s Consumer Duty rules is raising standards across the industry. While this may provide comfort to trustees, it can be difficult to understand how the Consumer Duty rules translate into improved day-to-day outcomes for their members after a buy-out, and whether these improvements will be maintained long into the future.
This is the first in a series of articles in which we will consider the challenge faced by trustees, before proposing how we as an industry can work together to make sure members are well looked after long into the future.
What does “good member experience” actually mean?
“Being well looked after” is tricky to define and may mean something different to different members. Of course, we expect timely responses to queries and quotation requests, appropriate services for vulnerable members, care shown at difficult times and clear communications. That said, members differ in their preferences for how administration services are provided. Though we are seeing increased take-up in online self-service, many members still prefer personal support.
Even before looking to the future, defining and comparing service quality across insurers today is not straightforward. Trustees and advisers can find it difficult to compare insurers on a genuinely like-for-like basis. Some service metrics are relatively objective – call handling times, complaint volumes, turnaround times for quotations – but others are inherently subjective, such as tone of communications, empathy in bereavement cases, or how non-standard queries are handled.
Service offerings from insurers are also continually changing. Investment in technology, changes in administration models, decisions to outsource (or bring in-house) operations and M&A activity can all impact the member experience. As a result, past performance is not always a reliable guide to the future.
There is also the question of how the current service provided by a scheme’s administrator compares with that of the insurer. For some members, moving to an insurer will represent a clear and welcome improvement in service. For others with strong, responsive administrators, digital access to benefit information and quotes 24/7, the experience may feel like it has stepped down, regardless of which insurer is chosen. Trustees must grapple with this reality when considering how “good” member experience really will be for their members, in relative terms.
The buy-in phase: where perceptions are formed
The buy-in phase (the period between the purchase of a buy-in and transition to buy-out when administration is transferred to the insurer) is a critical time during which member view of the trustee’s decision to insure is established.
Trustees will typically try to reassure members that there is no immediate impact to them, beyond the improved security of benefits, and that they can continue to contact the scheme administrator and access their benefits without change. However, the buy-in phase can bring significant changes to the manner and speed with which member option quotations are calculated and provided due to the aim of ensuring all new benefits are paid in line with those insured, which the insurer has a role in calculating. This often results in longer waiting times for members to receive benefit quotations and member websites no longer functioning in the same way. Trustees are understandably reluctant to significantly change or remove this functionality in the fear of disrupting member experience at a sensitive time. However, integration between insurers’ calculation systems and pension schemes’ administration platforms is usually difficult and therefore some disruption is unavoidable, resulting in a poor first impression for members.
Buy-ins are often lengthy and complex exercises, and it can be difficult for trustees to be open about long-term plans when key details – including the eventual insurer – are not yet known (and that’s before even considering auditors’ views!). Pre-planning also has limits. Much of the detailed work required to manage the immediate member experience after the buy-in can only begin once an insurer has been selected, at which point all parties are typically keen to move quickly.
Living with imperfect information
Trustees are required to choose an insurer based on imperfect information and with no certainty that the quality of member servicing that they see today will be the same in future; servicing in this market (like many others) is evolving rapidly and long-term outcomes cannot be guaranteed.
However, accepting an inability to influence member experience after wind-up does not mean that trustees should not seek information and (as far as practicable) assurance. There is a clear opportunity – arguably a responsibility – for trustees, advisers and insurers to push for clearer and more meaningful information about member experience, both as they conduct due diligence before purchasing a buy-in and for a long time afterwards. As member experience becomes more scrutinised as a criterion for trustees selecting an insurer, there is a growing call for greater transparency, more consistent reporting and a sharper focus on outcomes that matter to members.
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