Half of the respondents to a Geneva Association survey said an increased level of trust in insurers and brokers would encourage more insurance buying

More trust in insurers and brokers would help close the protection gap, according to a survey from the Geneva Association.

The study conducted in seven mature economies, revealed that for half of the respondents an increased level of trust in insurers and intermediaries would encourage additional insurance purchases.

“Trust is an indispensable ingredient in the insurance business. Insurers sell contingent promises to pay, often at a distant point in the future,” said Jad Ariss, managing director of the Geneva Association.

“In emerging markets, where the insurance industry has little operating track record, technology can build insurance processes and expedite trust building,” Ariss said.

“In mature markets, new technologies can underscore insurers’ customer centricity and the appeal of their products, fostering trust and tackling long-standing protection gaps,” he added.

Digitisation is triggering fundamental changes in the trust landscape, according to the report, named “The Role of Trust in Narrowing Protection Gaps”.

A major impact arises from the creation of new technology-based intermediaries, the Geneva Association said.

“They provide a trusted digital platform for large communities of people representing both the demand and supply side in the emerging sharing or platform economy,” said the Geneva Association.

“In the more specific context of insurance, trust can be defined as a customer’s bet on an insurer’s future contingent actions, ranging from paying claims to protecting personal data and ensuring the integrity of algorithms,” the report said.

The technology-enabled rise in peer to-peer trust and the amplification of word of mouth is entering the world of insurance as affinity groups and other communities organise themselves through online platforms, according to the study.

Such business models replace trust in an insurer with trust in peer groups and the technology platforms that organise them, the Geneva Association noted.

Blockchain represents another example, the report suggested. Some insurance start-ups have pioneered blockchain’s use to improve efficiency, transparency and trust in unemployment, property and casualty, and travel insurance.

“These developments are set to usher in an era in which customer data will be a key source of competitive edge. Therefore, gaining and maintaining customers’ trust in how data is used and handled will be vitally important for insurers too,” the Geneva Association said.

“This imperative also applies to the integrity and interpretability of algorithms based on artificial intelligence (AI), given the major reputational risks associated with potential biases inherent in such algorithms.”

The Geneva Association identified three major factors in trust.

“First, considering the performance of insurers, how an insurer services a policy and settles claims is core to building or destroying trust.

“Second, regarding the performance of intermediaries, it is intuitively plausible that those individuals and organisations at the frontline of the customer interface are critically important to the reputation and the level of trust placed in the insurance carrier.

“And third, taking into account sociodemographic factors, most recent research finds that trust in insurance is higher among females. This research also suggests that trust in insurance decreases with age and that insurance literacy has a strong positive influence on the level of trust in insurance.”

The Geneva Association proposed a roadmap to increase trust in insurance.

Based on this paper’s theoretical and empirical findings, we propose a concrete stakeholder road map for ensuring that insurance markets are optimally lubricated with trust.

“In order to enhance their contribution to society by bolstering customer trust, we recommend insurers and their intermediaries to facilitate claims settlement, increase product transparency and simplicity and to ‘borrow’ trust from non-insurance companies or influencers.

“Customers and their organisations are encouraged to support collective action against fraud and to share personal data with trustworthy insurers, enabling lower rates and more personalised offerings.

“And finally, policymakers and regulators are invited to promote access to insurance, ensure insurers’ solvency and claims-paying ability, and foster competition in insurance markets,” the report added.