Im­prov­ing Con­sumer Ed­u­ca­tion and Pro­tec­tion

AS A GEN­ERAL RULE, IN­SUR­ANCE IS NOT SOME­THING THAT IS GIVEN MUCH THOUGHT MOST OF THE TIME, FOR VAR­I­OUS UNI­VER­SAL AS WELL AS CUL­TURE-SPE­CIFIC REA­SONS.

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In the USA, for in­stance, which is a so­phis­ti­cated mar­ket and one where in­sur­ance is a hotly de­bated topic (es­pe­cially uni­ver­sal health in­sur­ance), a study con­ducted by LIMRA In­ter­na­tional, Inc., in con­junc­tion with its 2013 Life In­sur­ance Aware­ness Month, re­ported that life in­sur­ance was of pri­or­ity for less than 40% of con­sumers. In Malaysia, this is part of a larger fi­nan­cial lit­er­acy prob­lem, with 67% of Malaysian house­holds “poorly pre­pared to deal with in­come shocks with sav­ings of less than three months” 1, as Bank Ne­gara puts it in its Fi­nan­cial Sta­bil­ity and Pay­ment Sys­tems Re­port 2013. Be­cause of this lack of lit­er­acy as well as lack of in­ter­est, there is not much in­cen­tive for the gen­eral pub­lic to study in­sur­ance in de­tail, with the pre­dictable re­sult that in­sur­ance be­comes some­thing of a ‘black box’ for the av­er­age con­sumer. Worse, there may be a neg­a­tive view of in­sur­ance amongst some, due to the ‘gap’ be­tween cus­tomer ex­pec­ta­tions and ac­tual cov­er­age pur­chased – as ev­i­denced by on­go­ing on­line fo­rum dis­cus­sions both in Malaysia as well as glob­ally. The sit­u­a­tion is not helped by the rel­a­tively few un­scrupu­lous agents who mis­rep­re­sent in­sur­ance sold, as one drop of bad milk spoils the whole con­tainer. Hence, there is a need to both bet­ter ed­u­cate in­sur­ance clients, as well as mu­tu­ally pro­tect both par­ties from un­pleas­ant in­ci­dents.

In gen­eral, a large pro­por­tion of peo­ple don’t like to read, even for plea­sure2. Hence, in­sur­ance ed­u­ca­tion can­not stop at sim­ply pro­vid­ing pages and pages of small print and con­tract doc­u­ments – most peo­ple will sim­ply ig­nore them and file them away. There is also a need, when pro­vid­ing these doc­u­ments, to use plain lan­guage and not sim­ply use le­gal ter­mi­nol­ogy; also, a friendly and con­sis­tent tone and man­ner are im­por­tant. This is a ne­ces­sity; even a body the size of the US Fed­eral Govern­ment has recog­nised it as a par­tic­u­lar prob­lem in its own com­mu­ni­ca­tions and has started to ad­dress the is­sue. In ad­di­tion, in­sur­ers should con­sider pro­vid­ing con­crete ex­am­ples or even case stud­ies which il­lus­trate what kind of cir­cum­stances are cov­ered (and not cov­ered), not just use the­o­ret­i­cal lan­guage, be­cause most peo­ple can’t un­der­stand much if de­tails of their in­sur­ance pol­icy is pre­sented only in ab­stract terms. In­deed, the IBS Cen­ter for Man­age­ment Re­search has in­di­cated that peo­ple learn more, and ab­sorb com­plex mat­ters bet­ter, through case stud­ies than other tra­di­tional ed­u­ca­tional meth­ods. It is also nec­es­sary to dis­tin­guish be­tween how in­sur­ers mar­ket prod­ucts to prospec­tive clients, and how those same clients should be ed­u­cated. While mar­ket­ing should in­deed in­volve both ‘push’ (ac­tive) and ‘pull’ (pas­sive) BNM Re­port, Page 120 Page 32-33

strate­gies, in­sur­ance ed­u­ca­tion re­quires more of a ‘push’ strat­egy, rather than a ‘pull’ strat­egy. That is to say, in­sur­ers who want to thor­oughly ed­u­cate their cur­rent and prospec­tive clients must ini­ti­ate the ed­u­ca­tion process and not wait for such clients to come to them. This is in line with Bank Ne­gara’s strat­egy, which in­cludes col­lab­o­rat­ing with the Min­istry of Ed­u­ca­tion to en­sure that fi­nan­cial ed­u­ca­tion is taught both to stu­dents and teach­ers3, whether they think they need it or not. In this re­spect, the cur­rent col­lab­o­ra­tion be­tween in­sur­ers and Bank Ne­gara through the Con­sumer Ed­u­ca­tion Pro­gramme (CEP) known as In­sur­ance Info is a good start. This is not to say that in­sur­ers should con­cen­trate ev­ery­thing on the ‘push’, and aban­don the ‘pull’ strat­egy com­pletely, since newer gen­er­a­tions, used to the free-flow­ing na­ture of the In­ter­net, will start en­gag­ing more closely with their cho­sen brands. It goes with­out say­ing that re­gard­less of which­ever strat­egy (or strate­gies) em­ployed, in­di­vid­ual in­sur­ers should make ac­cess to in­for­ma­tion low-fric­tion, and the in­for­ma­tion it­self needs to be eas­ily di­gested. Nor is ed­u­cat­ing the in­sur­ance clients all there is to it. Ed­u­ca­tion of the in­sur­ance chan­nels (e.g. agents, bro­kers, ban­cas­sur­ance rep­re­sen­ta­tives) is also key to avoid mis­un­der­stand­ings or mis­com­mu­ni­ca­tions be­tween in­surer and client. This goes be­yond the ex­am­i­na­tions which MII han­dles, sub­se­quent ad­di­tional qual­i­fi­ca­tions and CPE. In­sur­ance chan­nel rep­re­sen­ta­tives need to be well-grounded in ethics and the pro­fes­sional codes of con­duct that gov­ern them4, whether in­dus­try-wide or com­pany-spe­cific, and what this means in prac­ti­cal terms. In­di­vid­ual in­sur­ance com­pa­nies must also thor­oughly train their chan­nels in the specifics of their own prod­ucts – if the chan­nel rep­re­sen­ta­tive does not know what the prod­uct fea­tures and lim­i­ta­tions are, the cus­tomer isn’t go­ing to know ei­ther. In ev­ery­thing that has been dis­cussed to this point, though, very lit­tle fo­cus has been given to pro­tect­ing in­sur­ance cus­tomers af­ter the fact. Em­pow­er­ing the in­sur­ance cus­tomer through ed­u­ca­tion alone only goes so far. Af­ter all, while ed­u­ca­tion is sig­nif­i­cant in ad­dress­ing the dif­fer­ence be­tween ini­tial cus­tomer con­cepts of in­sur­ance, and the level of in­sur­ance they end up buy­ing, it is not the sole com­po­nent in pro­tect­ing cus­tomers. In­sur­ance it­self is all about pro­tect­ing or shield­ing cus­tomers from the ef­fects of ad­verse cir­cum­stances. When the in­evitable hap­pens, cus­tomers – who have a le­git­i­mate ex­pec­ta­tion that their losses will be com­pen­sated – will be un­der­stand­ably up­set if, de­spite all their pre­cau­tions, they do not re­ceive the ben­e­fits they thought they were en­ti­tled to and paid for. BNM Re­port, Pages 120-121 http://bit.ly/TLit4f, http://bit.ly/1rSqmkj

There are al­ready many pro­tec­tive mea­sures in place to en­sure that cus­tomers do not feel pres­sured into buy­ing what they don’t need or didn’t want (e.g. the “cool­ing off” or “free look” pe­riod for life in­sur­ance poli­cies). How­ever, more can be done, es­pe­cially through sel­f­reg­u­la­tion, so that the in­sur­ance in­dus­try can avoid even more bur­den­some com­pli­ance with statu­tory or reg­u­la­tory re­quire­ments. Bank Ne­gara has stated its in­ten­tion to es­tab­lish a Fi­nan­cial Om­buds­man Scheme5, which, if im­ple­mented, would be prac­ti­cally the rem­edy of last re­sort for the in­di­vid­ual cus­tomer. It is to the in­sur­ers’ ad­van­tage that pro­vide as many lay­ers of com­plaint han­dling as prac­ti­ca­ble so that is­sues are re­solved be­fore be­ing es­ca­lated to that level. To that end, in­sur­ance com­pa­nies need to in­vest more smartly in their front-line and back-end in­fra­struc­ture, im­prove the claims-han­dling process, and pro­vide a con­stant and trans­par­ent com­mu­ni­ca­tions stream with their clients6. In sum­mary, the whole point of up­grad­ing the way we ed­u­cate and pro­tect our clients is to main­tain (or even im­prove) the pub­lic opinion of the in­sur­ance in­dus­try as a whole, as well as up­hold the rep­u­ta­tion of in­di­vid­ual in­sur­ers. In order to do this in the most op­ti­mal fashion, our cus­tomers must not be looked at merely as in­come sources, but as life­long part­ners in this busi­ness. Hence, their ed­u­ca­tion and pro­tec­tion should not only be in the begin­ning of our re­la­tion­ship, but through­out the life­span of their poli­cies.

...our cus­tomers must not be looked at merely as in­come sources, but as life­long part­ners

in this busi­ness.

BNM Re­port, Page 123 http://bit.ly/1qvH23c

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