The practice of offering the holding insurer final refusal on group risk renewals is commonplace throughout the sector. But, John Ritchie asks, is it harming you and your clients' business?
IRONING OUT THE CREASES
So, what’s not so good in our market? The perennial bugbear raised by advisers and clients is that the quality of service they receive from group risk insurers is no better than mediocre, and often much worse.
Although there has been steady improvement in service standards over the past five years, this has been from an embarrassingly low base, and it is acknowledged that the investment in systems and processing in group risk insurers is lagging behind other financial service providers and distributors.
It is still not uncommon for scheme accounts to be issued long after their due date, often with errors that mean a further wait while they are reissued.
Medical underwriting of senior employees (often the ones making the decisions about the insurance of their companies’ benefits) can be convoluted, with many individuals ending up limited to the free cover limit because the process is just too tedious to complete.
Could there be a relationship between these and other service shortcomings, as well as the practice of giving holding insurers the last shout at scheme rate reviews?
Think about it this way: if this is how they are asked to operate, what incentives do insurers have for improving their service?
No insurer sets out to provide bad service. But if holding insurers know that when rate reviews come around, they can put out any rate knowing that they will later get a chance to match.
It must seem as though the final price is what they need to focus on so they do.
Unfortunately, in matching other companies’ rates, insurers often have to kiss their own pricing basis goodbye and retain business on terms that they know could give them a poor return, or even none at all.
Given the pressure on their margins, it is hardly surprising that companies feel disinclined to improve their service.
This requires investment, which the pressure on their margins brought about by matching best rates time after time doesn’t allow for, and there is no evidence that improving their service, rather than paring their prices to the bone, will lead to them retaining or winning any extra business.
