Keeping on the issue of treating customers fairly (TCF), this month I want to highlight the equally unfair practice of charging customers fees for cancelling or making changes to policies.
However, this is not intended as criticism.
With trail commission being slashed by some providers, and the Financial Conduct Authority (FCA) driving down commission, I appreciate that brokers are under pressure, and so I also hope to offer a solution.
So called “stealth fees” for the set up and cancellation of insurance policies have long been criticised. It seems common practice for fees not to be refunded to the customer if they cancel their policy, as well as loading additional charges if they wish to make material changes.
A report in the summer by a leading price comparison site found a marked increase in stealth charges, such as adjustment fees, cancellation charges and other administrative fees, between 2012 and today.
While this report points a finger at motor insurance, the issues raised apply equally to general insurance sales.
Brokers must be upfront about such charges, and make them clear in their terms and conditions, however my big issue with this practice, aside from the obvious TCF issues, is that making such charges risks damaging the customer relationship.
This is something brokers cannot afford to do in such a competitive and customer driven market.
At a time when consumer trust in the insurance industry is low, and when customers have more access to a wider range of products, from a wider range of providers than ever before, one of the biggest issues facing brokers and intermediaries is improving customer engagement and retention.
Charging cancellation and adjustment fees is an unfair practice, but importantly it is unnecessary in an age where technology and specifically the harnessing of live customer data offers a solution.
Technology can offer brokers real time notifications of customer activity such as cancellations, failed direct debits, cancelled mandates, and so on.
By facilitating real time customer management these live customer dynamics ensure brokers are never caught on the back foot – for example, only finding out a customer has cancelled a policy when their commission statement comes in.
And it can foster proactive engagement, prompting brokers to pick up the phone, speak to the customer and address their concerns.
In doing so, not only can a broker save the sale but they also have an opportunity to deepen the relationship, by gaining a clearer understanding of the customer, their lifestyle, concerns and needs.
Rather than simply allowing the customer to cancel for a quick buck, brokers should be striving to exceed expectations.
Brokers must begin to realise that in the age of the customer the old ways of working will no longer bear fruit and evolve based on experience.
They must embrace technology as an enabler and harness the solid reasons it delivers to have a conversation.
In doing so, they’ll differentiate their proposition, build credibility and trust, build loyalty, and ultimately earn more than they ever could from small cancellation and adjustment fees.