Lloyd’s today published a new report, Building simpler insurance products to better protect customers, which sets out a number of ways the global insurance industry could remove complexity and provide enhanced coverage clarity for their customers.
The COVID-19 pandemic has set in motion irreversible societal change around the world, calling for new insurance solutions and greater protection for customers’ short, medium, and long-term needs. As countries and businesses begin to reopen cautiously and recover from the immediate economic and societal impacts, the insurance industry must take this opportunity to improve the way it protects its customers.
While the global insurance industry’s response and recovery efforts continue to expand through claims payments, charitable donations, and product innovation, there have been distinct complications that have arisen from pandemic insurance coverage uncertainty and resulting court disputes between insurers and their customers.
This report, developed in collaboration with Lloyd’s Global and UK Advisory Committees, has been published to support the global insurance industry’s efforts to better serve its customers through simpler products that promote enhanced understanding of coverages. It provides three important recommendations that the industry should implement to respond to the challenges that COVID-19 has presented:
- Leverage and build on the application of existing leading practice, including a linguistics review of customer documentation - for both simple and more complex products.
- Invest in continuous product design and delivery innovations, including data-led policies and digital contracts, as well as exploring more radical options like parametric or outcome-based insurance.
- Involve customers directly in product design to build simpler, more relevant products for their changing needs and post-pandemic risk profiles.
Alongside the global industry recommendations, Lloyd’s is taking its own affirmative action which includes reviewing how products are developed, designed and distributed, as well as reaching out to trading partners, risk managers and customers, so it can proactively implement changes across its global marketplace to enhance customer outcomes and more effectively meet their needs.
The report also looks at the steps the insurance industry and regulators have already taken towards addressing issues around insurance product complexity and clarity of coverage, including regulation, guidance and codes of conduct.
Lloyd’s CEO, John Neal, said: “As many businesses around the world evolve to withstand the continued impacts of the COVID-19 pandemic, including radically changing their business models, the insurance industry must urgently reassess how it can better serve and support its customers. While the societal and economic impacts of the pandemic are of a scale that has never before been experienced, it has reinforced the global industry imperative to accelerate its efforts to build simpler insurance products that are more easily understood by its customers.”
Flora Hamilton, Director of Financial Services, CBI, added: “In a fast moving, changing market this welcome report from Lloyd’s highlights the importance of simplicity in a complex world. The CBI welcomes the focus on innovation and collaboration, this will be needed more than ever as we build back better from the pandemic. We hope this outcomes-based approach influences wider debates about resilience in the UK economy.”
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Lloyd’s sets out recommendations for building simpler insurance products in response to COVID-19