In this blog post we take a look at how Insurers can unlock the Consumer Duty golden opportunity with Open Banking and Open Finance.
“We may see this lower premium trend reverse, as costs to firms increase, including as a result of supply chain issues, inflationary pressures, higher claim costs, as well as firms removing unsustainable introductory discounts” FCA - Dear CEO, Our expectations on cost of living and insurance. 29 September 2022
The insurance industry has a lot on its plate…
In September 2022 the FCA wrote to insurance industry CEOs to set out its expectations about how insurers should manage their customers through the cost of living crisis. The FCA acknowledged the financial, product and economic challenges that the industry faces and made clear that the Consumer Duty must be central to any response.
Are insurers Consumer Duty Consumer Duty ready?
Given the headwinds facing the insurance industry it’s understandable that some insurers may be struggling to get to grips with Consumer Duty. Moneyhub’s recent Whitepaper, ‘Consumer Duty: Business Burden or Golden Opportunity’ revealed that compared to other sectors in the survey, insurers have one of the lowest levels of understanding of Consumer Duty. Furthermore, insurers were of the view that Consumer Duty’s impact on the sector would be low. Only 12% said it would have a major impact on them compared to nearly half of banks and building societies. A staggering 43% of insurers surveyed said they were yet to develop their plans, a significant concern given the FCA expected boards to have an implementation plan approved by the end of October 2022.
Where will insurers focus?
When asked about which of the Four Customer Outcomes presents the greatest challenge insurers were united in their focus on the ‘downstream’.
The Consumer Understanding Outcome requires insurers to design communications that help consumers make effective, timely and properly informed decisions
The Consumer Support Outcome means that insurers must enable consumers to realise the benefits of the products and services they buy and can act in their interests without undue hindrance.
Data powered solutions - it’s all about the ‘-ilities’
A majority of insurers told us that ‘Behavioural insights based on customers’ transaction data’ and ‘A holistic view of customers’ income, expenditure, assets and liabilities’ were most important in planning a data led response to the Consumer Duty. Moneyhub’s open data platform provides access to Aggregated, Categorised consumer transaction data to power processes and dashboards that identify vulnerability & capability, affordability, suitability or eligibility.
The same data can help firms understand their customers’ needs, characteristics and behaviours and, when combined with our Personal Financial Manager App or APIs, can identify real time changes in consumers’ circumstances to nudge consumers at the right time and in context.
Open Banking and Open Finance can power a range of Consumer Duty use cases that make good business sense for insurers and improve customer outcomes, for example:
Income, expenditure, asset and liability data can help identify the right level of insurance cover for a customer
Transaction data, such as from a credit card, current account or point of sale loan can provide evidence of insurable items purchased or services used
Use data to identify customers who appear underinsured, or are in financial difficulty Identify changes in a customer’s circumstances as a prompt to review and adjust policies
Interactive nudges can check a customer’s understanding of the policies they’ve bought or initiate the use of a policy’s features, such as when travelling abroad
Prove eligibility for a ‘social tariff’ for those on low incomes
From product outcomes to customer outcomes
Many insurers claim to have millions of customers when in reality they’ve just sold a lot of products. In a complex, competitive, confusing world Moneyhub helps turn transactional buyers into loyal, engaged customers. When clarity and confidence about what your customers really need and want is in short supply, Moneyhub gives you the tools you need to comply with the Consumer Duty AND deepen relationships with customers, increase share of wallet and grow your business.