Find out more about the key findings from our research
In
summary
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Dominic Watkins
Partner, Head of Consumer Sector
+44 (0)207 645 9591
T:
+44 (0)7734 508634
M:
dominic.watkins@dwf.law
E:
Insurance literacy
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Looking ahead: Perspectives from young customers
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Oversight
and regulation
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Impact of the pandemic
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Cost
and value
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Impact of the pandemic on perceptions of insurance
Half of businesses say that the pandemic has changed their views on insurance, but opinion differs depending on the size of the business. Where perceptions of insurance have shifted due to the impact of the pandemic, these have been largely positive. A substantial proportion of respondents
either appreciate their insurance policies more, or they acknowledge the need for more insurance cover.
However, for 27% of consumers and 22% of businesses, some or most of their insurance policies are now seen as useless, and 15% of both groups say the pandemic has made them believe that they need less insurance cover.
Respondents appreciate their insurance policies more
Acknowledge the need for more insurance cover
40%
38%
42%
41%
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In summary
In summary, and perhaps counter-intuitively, it reveals that the pandemic has positively reinforced buyers’ perceptions of insurance, with nearly half of consumers (41%) and businesses (42%) reporting that the pandemic has made them appreciate the importance of insurance policies much more. The vast majority, 93% of consumers and 94% of businesses, are satisfied with the service of their current insurers. That said, both groups believe that the insurance buying process could be improved, with 66% of consumers and 70% of businesses stating that choosing or buying an insurance policy is always a difficult process. Both sets of buyers are aligned on calling for clearer policy documents. They want policies to be written in plain English with greater clarity around product information, especially more transparent explanations of any caveats or exclusions.
Satisfied with their insurance provider
Insurance polices meet their expectations
91%
81%
94%
93%
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Businesses
Consumer
Insurance policies are now seen as useless
Pandemic made them believe they need less
insurance cover
22%
27%
15%
15%
Businesses
Consumer
Cost and value
When it comes to the price of insurance policy premiums, it seems there’s something of a two-tiered approach.
Over a third (36%) of businesses would consider paying higher insurance premiums than originally planned, suggesting they are eager to have more coverage, with the remaining businesses wishing to either keep the same price (48%), pay lower premiums (15%) or drop the policy altogether (1%).
On the consumer side, most respondents (63%) are happy to keep paying the same premiums. Seemingly, they are satisfied with their current insurance price to coverage ratio. Only a small number of consumers (14%) said they would consider paying higher premiums overall for their insurance policies.
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Insurance literacy
Businesses and consumers appear to understand their insurance policies well. In general, they pay close attention to the small print and know what they’re buying. However, there remains an important role for professional advisers.
Nearly all businesses (95%) and consumers (93%) claim to understand their insurance policy documents. On the surface, this suggests a high degree of insurance ‘literacy’ across the board, though a more detailed reading of the data reveals considerable differences between the two cohorts. Only 66% of consumers read their policy documents thoroughly, which perhaps belies their stated levels of understanding.
This gap may be explained by a reluctance to seek professional advice, with nearly two-thirds of consumers (64%) not using an independent broker to help them understand what they are paying and what they are covered for.
The most commonly-bought policies are the best understood by consumers. However, the more specialist the policy (such as disability insurance), the more complicated the buying process and therefore the greater the need for expert advice from intermediaries. With policies such as these, the vast majority (73%) of respondents say they seek help from a broker.
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100
90
80
70
60
50
40
30
20
10
0
Brokers are key to understanding
Business policies:
Always/occasionally use a broker
Never use a broker
Public
liability
Employers’
liability
Product
liability
Professional
indemnity
Property
Commercial
motor
Business
interruption
Key-man
Credit
risk
Cyber
Directors
and
officers
100
90
80
70
60
50
40
30
20
10
0
Life
Health
Disability
Home
Vehicle
Travel
Pet
Consumer policies:
Always/occasionally use a broker
Never use a broker
Oversight and regulation
The insurance industry is inevitably and understandably highly regulated. However, there is a lack of consistency when it comes to general awareness of some of the more significant measures in place to help buyers of insurance products.
More than half of businesses (55%) confirmed that they knew of the FCA’s value data measures, and a significant majority of those that knew (69%) have also used these measures to help them select the best insurance products for their needs.
For consumers, however, less than a quarter (24%) have heard of the value data measures, and over half (56%) have never used them when buying a policy.
There is clearly room for the FCA to raise the profile of these measures more vigorously among consumer audiences.
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of businesses don’t know about the FCA’s rules to prevent insurers charging new customers less than existing customers
45%
of consumers have never considered the FCA’s value data measures when buying policies
56%
of businesses and consumers are satisfied with the Financial Ombudsman Service
90%
Over
Looking ahead: Perspectives from young customers
The future of insurance might well be shaped by the insights and views of younger consumers. For many of this cohort, insurance is an important issue about which they are well informed. However, this generation has high expectations of their insurance providers and the policies they provide.
Almost three-quarters (73%) of 18 to 24 and 25 to 34-year-olds are likely to read their insurance policy documents closely compared to older consumers.
Far from the broad assumptions of young people being more reckless, it seems that many younger people are happy to confront their lack of familiarity with, and understanding of, insurance.
Younger consumers have high expectations of insurers and are more likely to be critical of their experiences compared to other age groups. Of those in the 18 to 24-year-old category, nearly a third (32%) are more likely to have felt let down by their insurer – double the average of other age groups (16%).
Additionally, 31% say their insurer lacks empathy and 28% believe insurers don’t provide them with the right support. These findings suggest that insurers have work to do to ensure they meet the expectations of the customers who might stay with them the longest.
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25% of young consumers would pay more for their insurance premiums
42% of those willing to pay
more would pay 20%-40% more for better coverage
71
75
86
74
70
69
78
90
89
83
84
29
25
14
26
30
31
22
10
11
17
16
45
50
73
29
33
37
36
55
50
27
71
67
63
64