U.K. insurers are facing the prospect of having to further upgrade IT systems and make other changes to business processes to meet new standards of customer care protection being introduced by the Financial Conduct Authority (FCA). Insurers in the EU and wider afield will also be watching these developments closely as their regulators consider or are already tightening similar rules.

From the end of July, U.K. insurance firms will have to ensure that all policies meet a new duty to deliver good outcomes for consumers. They will need to show they can proactively assess and demonstrate how they deliver those outcomes. This will have significant implications for how data about products, services, and customers is stored and used within organisations.

The wording, in the form of guidance to reinforce existing FCA conduct requirements, is deliberately generic to enable the widest application. It expects this consumer duty to be dynamic, adaptable, and applied to all new products, services, and business models as the sector becomes more digital.

Aging IT systems

The timing of these moves is not ideal, as it presents additional technology challenges for an industry wrestling with the upgrading of often aging IT systems. However, they are imperative to meet already onerous regulatory standards, tougher competition, and demanding customers. It is not uncommon for legacy data systems to contain incomplete or outdated information. These will now require further data cleansing and verification techniques for the accurate analysis and personalised support that will be expected.

In addition, insurers are having to contend with the expectation for greater customer personalisation at scale. This means balancing automation and personalisation to provide tailored support to a large customer base to deliver efficient processes and effective responses to meet individual needs.

Customer confidence

The FCA acknowledges this likely disruption, as it has advised insurers to assess processes and systems and to make any necessary adjustments. But some nuances must be considered to satisfy the new rules. These will not just be about more sophisticated technology, as staff will also need to be highly trained to offer appropriate products to customers.

This could apply when buying a policy, usually a complicated document with numerous technical phrases, where the guidelines raise questions about how insurers write policy wordings and present them to policyholders. They will need to consider options such as reassessing risk profiles, offering alternative products, and limiting or banning surrender charges for affordability reasons.

Insurers will have to ensure that policies and draft terms are presented in a confident tone. The customer must be aware of the policy provisions and coverage limits, particularly when no broker or intermediary is there to provide guidance.

This becomes difficult when policies are bought with minimal human input through comparison sites or direct from insurer websites. These are almost entirely reliant on electronic systems and algorithms to assess the risk based on responses to standard questions.

This can be efficient and convenient for both insurers and policyholders. But the lack of specific human involvement can mean certain customers do not secure the coverage they need. This could be due to selecting options that although appear best, might not be appropriate, given that the questions algorithms use to provide quotes can be confusing and potentially misinterpreted.

Better informed assistance, whether virtual or human (supported by technology), will therefore become critical. One simple way to demonstrate care over the customer journey is to implement a standard phone call to the customer soon after the online transaction to check its suitability.

Another could be the deployment of AI-driven avatars that are empowered by sophisticated IT resources. The avatars are deployed to use data that presents customers with wider and more detailed policy choices that are appropriate to their needs. Whatever option is selected, it is clear greater resources will be required to deliver the customer confidence the FCA is trying to achieve.

Heavy lifting

Moving forward, it is likely that the heavy lifting required to be compliant with the new standards will come from technology. These will revolve around more sophisticated use of data, at speed and scale to improve decision-making — both within an organisation and by customers.

At the heart of this is keeping pace with evolving regulations through proactive monitoring, timely adaption, and effective communication of changes. It will require a careful review and implementation of complex new regulations to effectively demonstrate compliance.

Insurers will also want to consider how they improve their engagement with customers by ensuring a seamless omnichannel experience. This means investing more in technology and infrastructure to deliver a consistent and user-friendly experience across channels when customers require more information or access to support.

More transparency

Better treatment of potential customer complaints and transparent communication is also top priority for numerous firms. This is due to a lack of clarity in communication or changes to policies and procedures that have led to frequent customer confusion and frustration.

In many instances, this has been caused by delays in processing and other inadequate support. For several firms, this will require greater investment in optimised resources to establish timely claims processing — one of the highest areas of complaint, particularly when offering support to those customers experiencing financial difficulties.

This latter group has been highlighted by the FCA as being one in need of particular attention under the new guidelines. It recognises that many of those affected by rising living costs could need special support from insurers. Looking to the future, it has asked for views on how companies could also provide better protection for customers having difficulties with consumer credit and mortgages.

This guidance covers an extremely wide range of actions central to the insurance industry. An industry that will not only need to address rule changes and legacy data challenges, but also customer experience expectations if they are to successfully navigate the new regulatory landscape.

Proactive measures

This will mean more proactive measures and strategies are required to ensure compliance, optimise data management, and deliver individual experiences, all while addressing customer concerns.

SoftServe has a wide range of experience working with financial institutions to resolve these challenges by deploying solutions and IT modernisations that include:

Data analytics for customer behaviour insight

Automation and process optimisation through cloud computing

Personalised customer support based on AI-driven predictive models

Real-time monitoring and early detection of potential customer financial difficulties

Enhanced fraud detection using AI/ML and data analytics

Seamless customer experiences across multiple channels

Collaboration and knowledge sharing with stakeholders across cloud platforms

By overcoming these challenges using one or more of those improvements, insurers cannot only be confident they can meet more demanding regulatory expectations, but also build trust, improve customer satisfaction, grow their business, and fulfil commitments to provide support in times of financial need.

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Insurers Brace for More IT Challenges as UK Tightens Consumer Protection Rules