Consumers Unwilling to Recommend Insurers

The lack of trust in life insurance by Australian consumers has come about because of a misalignment of interests that began with the demutualisation of the life insurance industry over 20 years ago, claims PPS Mutual Chief Executive, Michael Pillemer.

PPS Mutual, CEO, Michael Pillemer

PPS Mutual, CEO, Michael Pillemer

Commenting after the announcement of the sale of CommInsure to AIA Australia (see: CommInsure to be Sold to AIA), Pillemer said this misalignment has led to consumers becoming unwilling to recommend a life insurer to a friend, according to Net Promoter Score (NPS) data collected by Roy Morgan.

“The core problem is that most insurers are listed companies which place shareholder interests above the needs of their insured customers. Thus, there is a significant misalignment between shareholders’ and policyholders’ interests and because of this, many insurers aren’t well trusted and aren’t seen as making appropriate decisions,” Pillemer said.

“…most Australians would not recommend life insurance companies…given the perceived self-interest of these organisations…”

He added that as the number of life insurers becomes more concentrated improving consumer trust was the biggest challenge facing the life risk insurance sector and the use of NPS data, which indicates how likely consumers would be to recommend an insurance company, shows most Australian insurers have a negative NPS score

“This reflects the tarnished reputation of the industry and also that insurance is a grudge purchase,” Pillemer said, adding these views had been strengthened by perception the largest life insurers have unfairly rejected claims.

“The fact is, most Australians would not recommend life insurance companies and their policies to a friend given the perceived self-interest of these organisations,” he said.

Pillemer recommended life insurers adopt the use of NPS as an objective measure of an insurer’s reputation and to address the recovery of trust and reputation.

 

  • Chris Lucas

    Most people’s interaction with the insurer would be so minimal as to have nothing to recommend. In the advised space, it would be the adviser and not the insurer that would get the recommendation. I do agree however, that there is a general mistrust out there of insurers, this often comes from people’s experiences with general insures though. “I pranged my car and they didn’t pay….” and people not understanding the difference between general and risk insurance

  • Alleycat

    You could also start with the obvious point that since the introduction of the LIF legislation, life companies unilaterally saw the opportunity to
    1. Increase their premiums on Life, Income Protection and TPD policies between 10% -85.0%. In fact one large insurer it was noted increased level premium rates on an acquisition company’s income protection policies by 30.0%.

    2. Another company saw the opportunity to remove a “best of breed” IP contract and replace it with an inferior one which doesn’t distinguish the new one from any other.

    3. As Mr Pillemer has stated, poor claims handling by more than the one we are familiar with, and there are several others in that space, has eroded consumer confidence.

    4. And this is the most compelling reason of all.

    There used to be 57 life companies with 378 products available. Now through industry failure, rationalisation, there are 10 life companies with a handful of identical products, So what’s to recommend ?

    5. The enactment of the LIF legislation orchestrated by the FSC will see advisers want to be less involved, due to reduced commissions and 2 year clawback provisions.

    Who will want to recommend that ?

    Clearly the Life insurance industry has decided to rely on direct marketing to consumers, and by eliminating traditional distribution channels, hope that price and price alone will motivate consumers to buy their inferior products.
    What’s been forgotten in this process that’s worked for more than 100 years is that life insurance products have never been bought, they have always been sold, hopefully based on good advice provided by caring advisers.

    Never before have the words “caveat emptor” ever been more relevant on the future of the life insurance industry.

  • Ken

    Most don’t recommend companies as most don’t know who they are with ?? I have been told on numerous occasions I don’t know ? Our accountant set it up if I fix it through the bank
    Faceless names with cheap rates ( they think) as the rankle shown is the ” bothom of the bucket one ”
    Or my wife rang up and did it over the phone no paperwork !! How good is that ? How much was it ?? I don’t know ? She did it she would know ! I think
    ?
    Talk about lambs to the slaughter and it will unfortunately get worse

  • Reg Stenhouse

    consumers only have to call Insurers and the service they receive leaves clients wondering, AMP are a classic example, we the adviser and staff have to wait on hold min 20-30 minutes before we get a sniff of a response. Why would consumers recommend an Insurer when they receive such appalling service.
    When will they ever wake up and honestly admit consumers recommend their trusted Adviser not Insurance companies. Consumers have a far more pleasant and helpful experience calling their adviser to sort out the admin mess some Insurers deliver to clients.
    Advisers should be charging Insurers to fix the mess they leave clients with. Thankfully advisers receive the same docs as clients where we can pickup mistakes or omissions. .