Fair’s fair
Upheld complaints to the Ombudsman are on the rise, so what can insurers do to right things? – asks Roger St Pierre
First published in ITIJ 117, October 2010
Upheld complaints to the Ombudsman are on the rise, so what can insurers do to right things? – asks Roger St Pierre
Computerisation and the digital age have brought untold benefits to commercial enterprises and the general public alike, creating the so-called ‘global village’ in their wake. But IT’s greatest strengths can also be its biggest weakness. Removing the human element from so many aspects of day-to-day business has undoubtedly improved efficiency in manifold ways, but the emergence of a largely one-size-has-to-fit-all business model has caused considerable breakdown in the mutually satisfying customer relationships that should be the cornerstone of any successful commercial enterprise.
So what if one potential customer in 10 is a round peg that will not fit into your square hole? Let him go elsewhere, runs the mantra, for satisfying his or her needs is not seen as a cost-effective proposition. Unfortunately, this philosophy ignores the awesome power of word of mouth and the enormous damage a single dissatisfied customer can wreak through this most potent of all sales’ – and sales’ deterrent – media.
Price focus
This applies in the travel insurance industry as much as in any other commercial arena. That insurance advertising on TV, online and in the press is all focused on the role of low prices as a magnet for new business, while scant mention is ever made of the value of inclusive cover, good service and the resultant mutually beneficial value for money relationship, reflects the disturbing gap currently existing between too many insurers and their policyholders.
Basing sales efforts almost exclusively around bargain basement premium rates has inevitably led to a hardening of claims’ settlement policies and a weakening of customer service that is not helped by everything moving online – great for those square pegs in square holes. But a nightmare for those with complex questions that can only really be dealt with by proper human interaction. Long telephone waiting times, call centres that are often abroad and staffed by people who have poor linguistic skills and only basic policy knowledge only serve to exacerbate matters.
the emergence of a largely one-size-has-to-fit-all business model has caused considerable breakdown in the mutually satisfying customer relationships
The net result is increasing levels of customer dissatisfaction and therefore more referrals to the Financial Services Ombudsmen services around the world, who are increasingly finding in favour of the claimants – a trend that should be extremely worrying to an industry that deals in invisibles, making goodwill and a sound reputation for fair dealing critical elements of success. Loss of consumer confidence in the industry is today a very real and potentially disastrous scenario.
The statistics are starkly worrying. As reported in ITIJ, the UK’s Financial Ombudsman Service (FOS) found in favour of the customer in more than half of the 553 serious complaints about travel insurance products and services that it handled in April, May and June this year. This would seem to indicate that unfair treatment of claims is currently rife.
Comments Phillipa Cook of the FOS: “Our helpline has dealt with a 28-per-cent increase in travel insurance-related enquiries for the first six months of 2010, compared to the last six months of 2009, and it is a trend that looks likely to continue. Over the same time frame, we have seen a 10-per-cent increase in travel insurance-related matters being sent to our adjudicators as formal complaints for us to resolve.” The public appears unconcerned about the sales approaches used by the industry however: ‘The extension of our remit in January 2009 to enable us to look into complaints about the way in which travel insurance is sold alongside a holiday or other travel has resulted in only a small number of complaints,” reads the FOS annual report. It’s when it comes to the settlement of claims that bad blood sets in: “Almost all the cases we see relating to travel insurance involve disputes over the settlement of claims, such as for the cancellation or curtailment of a holiday, lost or stolen items of luggage or medical-related claims,” continues the report.
Problems proliferate
The sheer wordage and complexity of most insurance policies is part of the problem, with exclusions buried away in the small print. “Yes, it’s in there somewhere but you just try finding it,” says Brussels’ based travel consultant Alain Lefevre, adding, “it doesn’t help that most travel insurance is taken out at the time of booking the trip, when the client is more concerned about other aspects of the planned trip. A lot of my clients are very busy executives, working in European Union institutions or big business, and they simply do not have the time to plough through endless policy documents.” He added: “On the other hand, vacationers are focused on discussing the ins and outs of their holiday package and just sign up to travel insurance as an afterthought. Policies need to be concise, to the point and crystal clear about what is and what isn’t covered.”
The numbers of reported serious complaints are relatively small but is it merely the tip of a massive iceberg of customer discontent? Says the UK’s Financial Ombudsman, Bill Prasifka: “I believe that could be the case. The figures are only part of the story because they do not take account of the seemingly growing number of people who have to battle with their insurers but win the argument before it ever reaches us, nor the many who are unaware of our existence and services and simply give up the fight as an unequal struggle. It’s hard to pinpoint specific reasons for the recent rise in complaints. The figures do not, for example, include issues triggered earlier this year by the fall-out from the Icelandic volcanic ash cloud.”
We live today in a more and more sophisticated environment in which consumers are increasingly aware of their right to complain. The continued rise of the litigious society should give insurers due cause to look at how they treat their policyholders. As it is, huge losses caused by the Icelandic incident and other natural disasters have caused a perceptible hardening in claims’ settlement strategies across the industry. According to a recent BBC Radio report, some insurers are now demanding production of purchase receipts for every item that is claimed for under the lost baggage clause of their policies.
Canadian businessman Bill Oakley, who was burgled while on a business trip in Tobago, was even asked to provide the serial numbers of each of the banknotes contained in his stolen wallet: “I had Canadian dollars, US dollars, East Caribbean dollars and even a few euros,” he recalls. “Cash goes in and out of my wallet on a daily basis, as I expect it does with most people. You know how much you’ve got at any moment but have you ever heard of anyone who keeps a record of the numbers? – the banks don't even do that. But it took a ruling from the Ombudsman before I finally got my claim settled.”
Vigilance is key
As in all things, there’s another side to the story. Comments Malcolm Tarling, of the Association of British Insurers: “Last year, UK insurers detected some £5 million in attempted travel insurance frauds against the £200 million we paid out for legitimate claims. It’s crucial to be vigilant in verifying claims because fake claims result in everyone else paying more for their cover. It’s inevitable that some who believe their claims to be legitimate will feel they have been harshly dealt with and will end up taking their case to the Ombudsman.”
Australian consumer Janice Eden took out her policy online and was emailed the policy details: “It was in ridiculously small print, very difficult to read and the wording was very convoluted and difficult to understand anyway. Nobody has the time or the patience to plough through something like that, so you take the ads at face value and think you are well covered.” As it happens, the Melbourne-based designer had her complaint upheld by the Australian Financial Ombudsman Service: “I won, but it left a bad taste,” she reflects. “When you think of it, if the insurers played fair, the Ombudsman would not need to exist.”
What can and what shouldn’t be considered as a pre-existing condition – a prime reason for claims being turned down – is a murky issue: one UK insurer refused to pay for a cancelation caused by a chest infection, on the basis that the insured had earlier complained to his doctor about a cough. When the matter was referred to the Ombudsman, the insurance company lost.
the UK’s Financial Ombudsman Service (FOS) found in favour of the customer in more than half of the 553 serious complaints about travel insurance products and services that it handled
Consumer Director Frank Brehany and his team at holidaytravelwatch.com – a partner in the UK Foreign and Commonwealth Office’s ‘Know Before You Go’ campaign – have been looking after consumer interests for the past 15 years and deal with travel insurance and other holiday-related complaints from people located as far afield as the US, Australia, Korea, South Africa and Europe. “There are two main problem areas,” says Frank, “insurers often use ‘pre-existing condition’ as a justification for turning a claim down but do they make enough effort to ensure that people taking out their insurance properly understand the full implications of that term? It often arises that someone has lived with some minor chronic ailment for many years and no longer sees it as any kind of problem so does not declare it – sometimes through pure oversight and sometimes because they don’t think it is serious enough to count.” He went on to say: “The second area of concern for consumers arises when the insurer makes what the policyholder considers a harsh or inflexible decision over some aspect of the claim, leading to a fractious exchange. In too many cases, complaints are handed insensitively, leading to further frustration.
“To my mind, it should be incumbent on the insurer to ascertain that the insured fully understands what is meant by ‘pre-existing condition’ and what will be the effect of non-declaration. It’s all about communication. Yes, we now have the benefit of a regulated product – and that’s a good thing – but I don’t think that the current level of regulation is particularly effective in getting its message across.” He does believe there is a way out of the ongoing pre-existing problem, though: “To my mind, the industry could stand the whole ‘pre-existing condition’ issue on its head and use it as a marketing opportunity to educate the consumer into the line of thinking that in insurance, as in so many other things, one glove does not fit all. Disagreements can arise in all aspects of life but good communicators are able to resolve issues quickly and to mutual satisfaction.” So, what can insurers do to halt the flood of complaints? “Insurers need to explain clearly and logically how their travel insurance policies work and how complaints can be fairly and efficiently handled, long before the matter ever gets to the Ombudsman. Clear information and logical explanations should be the aim. Then, and only then, will consumer confidence return.”
One brighter note: travel insurance problems relate to just four per cent of all general insurance complaints dealt with by the UK Financial Services Ombudsman, compared to a massive 62 per cent for payment protection cover and 12 per cent for car insurance.