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Appalling insurance industry service levels

Adviser Jon- Paul Hale reckons insurance company service levels have dropped to an appallingly low level across the industry.

Friday, March 15th 2024, 8:44AM 9 Comments

by Jon-Paul Hale

Levels have fallen so much so that I'm getting clients emailing me about the appalling service levels of their providers when they try and do something by themselves.

This usually comes with questions about the quality of their cover and the likelihood of it working or responding.

For clients, this isn't necessarily an incorrect assumption, given that lack of service in other industries is directly indicative of something not working, like retail service, a telco, or a power company.

We have seen Fidelity Life come out falling on its sword and Southern Cross swinging, claiming it has "communicated with the market" despite the lack of evidence to the contrary.

nib recently apologised for its systems and service issues.

An employee of another insurer told me that a significant proportion of its staff has been with it for less than 12 months.

Resolution Life has had issues that still need improvement, but significantly improved from their merger service levels.

Accuro has been the pits with its cyber issue and new systems, too.

And the rest have had their issues with service levels around either timeframes, or accuracy of processing in recent times.

What gets me is that this isn't a new thing; it's been going on since Covid-19, and it's been getting worse.

I understand that finding and retaining staff is challenging; this has been signalled across all industries, but it's never been as bad as it is now.

What's the answer?

More money. More money on coherent working systems as well as wages. And yes, that will likely increase premiums, too, because they want to maintain profit margins.

Here's the thing: An operationally efficient business will automatically have better margins through reduced rework. The average policy change for one of my clients currently requires three attempts by the insurer to get it right.

Something has to change because the way it is, is not working presently and seriously undermines consumer confidence that the policies they have and the premiums they are paying will work as intended and expected.

One thing I have been unsurprised with, but it is still appalling, is the lack of documented processes in most insurer businesses. So much so that new staff from other insurers often don't follow that insurer's process, making the whole thing worse.

Talking to senior people across the industry, I'm surprised that there is a lack of operational documentation in our insurers, and I'm not surprised staff have a hard time getting things right as a result.

I was looking back over an old Sovereign adviser guide (6.3), and this was pretty good; it had a substantial level of operational procedures that were provided to the adviser and has since been removed.

I don't remember the 7.0 post-Colonial merger version having as much detail in it, so that may have gone west quite early in my time in the industry.

Out here in Adviser Land, we're expected to have not only good documentation of client interaction but operational processes for the business; at the same time, I'm seeing insurers lacking in most of these areas.

It raises the question of how to improve one's work without a measuring stick.

The idea that the outgoing person can train the incoming one has always been flawed, yet we still insist on this approach and are surprised when there are problems.

Sure, documenting things is boring, and maintaining things once created can be difficult; this is fundamentally why ISO standards were created. Business documentation and quality assurance that sits around it.

Most businesses won't look at ISO certifications because of the paperwork. Umm... that's the point: doing the paperwork to document the business operation to ensure it is accurate, consistent, and, better yet, able to be qualitatively improved.

We have the FMA looking at complaint registers and client documentation as the panacea for measuring adviser business compliance, when the reality is the client documentation comes from effective operational systems that ensure things get done the way they should Every. Single. Time.

When the documentation of my business for insurer processes exceeds the knowledge of the insurer staff of a process, we have a problem.

It's good that the average honest adviser has this level of understanding. The problem is that insurer staff mess the process up by asking for irrelevant things, not communicating with the right people, or, in the case I talked about with nominated beneficiaries recently, exposing them to fraud and loss.

What's my point?

Staff, insurer staff.

If you recruit into a company with poor process documentation and operational efficiency, you're setting your staff up for failure.

This sort of avoidable failure destroys morale and ultimately impacts staff well-being to the point that they either feel like failures and leave or are berated so much that, because of fear, they fail to take the initiative when needed to solve problems.

This is a top-down issue and one that insurer management needs to get their heads around and get behind. Otherwise, we're on a burning plane headed for a mountain, and that's not what is intended here.

We've had three years of an exceptional operating environment; we need to stop stretching people and get on with adjusting to business as usual (BAU) because what we have to deal with is now BAU, and it's never going back to what we had pre-2020.

Tags: Jon-Paul Hale

« If you dive into the weeds, then expect to drown in the swamp, eventuallyDigital Signatures and Fraud »

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Comments from our readers

On 15 March 2024 at 1:23 pm Backstage said:
JP interestingly service was better prior to technology, even dear I say before mobile phones. Now we have more ways to connect but no one answers.

Unfortunately some insurers are suffering badly from legacy systems, young staff with no strong motivation or adequate leadership. Working from home expectations and hallucinations of what work should look like. This is unfortunately indulged by several insurers who are attempting to be modern and woke.

I do feel the CEO's of several are amazingly out of touch and have not understood our frustration in attempting to assist existing clients with small enquiries. I was told by one insurer these enquiries on an existing plan now take 13 working days before a response. this is incredibly unacceptable.

Then we see the same CEO's handing out some type of excellence awards to advisers (that like this recognition) whilst that same CEO is operating a mediocre business.

Some may recall years ago when Sun Alliance had a service turn around guarantee where they would pay an adviser $50 if they did not turn an enquiry around in their benchmark time frame.

My strong view is CEO's (yes them, not line managers) should now really get problem solving an make service benchmarks and turn arounds this years focus. Get public, let us know you exist and are aware and stand up and get it fixed. Its during times like this they need to front foot, not hide internally busy with god knows what. Time to earn that salary!

It is top down and I strongly believe the CEO, not an Operations Manager or other Manager needs to come forward. Their picture in the emails, newsletters, GR interviews. Otherwise, I do not believe they are concerned or know how bad it has become.
On 15 March 2024 at 1:56 pm Do what is right said:
To be fair Jon-Paul, Insurance companies have been moving away from a service model for well before Covid.
We saw AIA decide that their BDM's could all be effective based in Auckland.
More recently, we have seen Fidelity decide that the knowledge they had in distribution was of no value. They dumped smart intelligent insurance people for those with little knowledge based in Auckland.
Resolution Life at least have been honest that their intention is to "milk" the book for as much profit as possible until it ultimately dies altogether.

The problem in my opinion, is that the insurance companies have appointed leadership who know little about out industry. Specifically, those with banking backgrounds who struggle to grasp that fact that we do not have people walking in the door, like in banking, to buy insurance. If I am not believed, look at AMP. They wee led by bankers who took a highly profitable company and destroyed it. The work of a banking mentality.

As long as we continue to have people from banking backgrounds leading our insurers, we will continue to see service from these insurers deteriorate.

Let me finish by asking a question: "Would you want a orthopaedic surgeon performing your heart bypass surgery"? If no, why would you want a banker running an insurance business?
On 18 March 2024 at 3:28 pm just an opinion said:
I agree with all of what "Do What is Right" has stated.

Over the last 5-10 years we have seen some very poor decision making from certain Insurance companies when it comes to how they value their employees and their institutional knowledge.

And often when it has come time to cut staff, or appoint new leadership, the wrong staff are let go and/or the person with the industry knowledge that is most suitable for the role, is overlooked for an external hire or someone cheaper.

These companies (and leadership) are now reaping what they sow.
The sad thing about these past decisions is that now the policy holder will have to carry the can for poor leadership and decision making within the Insurance company
On 19 March 2024 at 11:29 am From the Benchs said:
Do what is right is on the money as is Just an opinion
On 20 March 2024 at 12:56 pm JPHale said:
Well said all!

I agree that, like the rest of the country's infrastructure, this has been an issue that has been developing for a long time.

It's more acute recently, with Covid and a combination of retiring people and board restrictions ensuring that those heading overseas all disappeared en masse.

The whole LEAN methodology thing of doing more with less — yeah, that has not helped, as it has been about minimising the offering until it collapses with little delivered value.

It's like shrink-sizing products; that 250g bar of chocolate for $3 is now a 200g bar for the same price. Everyone just feels cheated while being able to do little about it.

Or the cheaper inferior ingredients that maintain price but spoil the product and consumer experience.

It needs to come from the top and do better.

On 20 March 2024 at 2:43 pm just an opinion said:
Sadly JP, I think that the ship has sailed for some of these Insurance companies.

They are going to have to rebuild that institutional knowledge or somehow, hire it back. That is going to be very time consuming and very expensive.

Poor leadership has led some companies here. It will now take leadership with true vision, as well as real connection, care and empathy with their workforces to get it back.

It has been very sobering to see the damage that can be done to reputations in such a short time, after taking years to build in the first place.

On 23 March 2024 at 9:20 am JPHale said:
@JAO True.

However, what I have seen with the likes of Fidelity Life and Asteron Life is their management has been engaging with the issues I have been shining lights on in dark corners.

Partners Life has had its moments, but its focus on service delivery has held it in good stead so far. It doesn't have the legacy issues of others. Of all the providers, Partners appears to have the cohesive institutional knowledge bit reasonably well managed.

nib has managed to make a meal of their systems changes, but they are positively engaged in addressing this, with changes and tweaks to things happening in a positive way. (Smoker management being a recent one)

Accuro has had massive failures they have sucked up and put a foot forward on that could have been a "we're done" and sold it off the moment their systems failed.

Res Life, as much as we don't like the idea of running down and maximising profits, have front-footed that and made changes that have improved things.

Southern Cross still seems to be determined to shun external adviser access, with more barriers to advisers servicing clients holistically being put up in the last six months, though that could be because I've been a thorn in their side and I'm probably on a "list".

AIA has continued to misstep. Of all the providers, they probably have the toughest time with significant institutional knowledge leaving the building and the old Sov/AIA businesses still not on the same page regarding service levels.

Chubb is the unknown; they have been focused on their various sales and being passed around the industry, and seem to be finally coming out to market to remind us they are there.

The challenge across all of them is that the front line doesn't have access to good operational procedures to refer to when stuck, so they often wing it and get it wrong.

I guess my point here, there is some light that some of them are getting the message, but a lot of work still needs to be done.

On 28 March 2024 at 2:31 pm mitsilad said:
Do what is right is correct but equally do we want Advisers with a life background dealing with Fire & General insurance, particularly commercial insurance?

However, I agree that insurance companies have a lack of insurance people. There are too many highly educated people who enter insurance from university.

All the best guys. Today ends my career after 50 years, 1 month and 20 days (not that I am counting). All of this in Fire & General.
On 7 April 2024 at 4:45 pm JPHale said:
@mitsilad generally no we don't want people without grounding and background in the specialty running things.

At the same time the external view, input, and ideas are needed to keep things on track.

It's a balancing act, one I don't think the current career CEO approach is getting right.

Thank you for your service, I hope you have good times ahead.

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Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
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Kiwibank 8.50 8.25 7.79 7.55
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Westpac 8.64 7.89 7.35 7.25
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Median 8.64 7.29 7.32 6.65

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