Digitalization and increasing demand have immensely affected companies in the insurance market especially since in the wake of the pandemic. With the competition scale arising daily comes the good aspect of it: the added drive to always be on top of the game. Yet, similarly there are some drawbacks that dangle in the background and some can be quite costly. Due to the limitations of time, effort and aid, some problems surface. In recent years, one of these problems that raised some eyebrows is the fact that companies are more prone to being penalized for delivering wrong information to customers.
One of these companies that fell prey to such an ordeal is Britain’s Lloyd Bank. As for now, they are being sued for a $125 M fine over delivering “inaccurate” information with regards to home insurance. This drove our experts to ponder upon how this could have been deflected. Is there a solution somehow related to outsourcing? The term “inaccurate communication” has a lot of hidden factors lurking in the background. However, this could be somehow diverted with the aid of a good outsourcer.
What Happened?
The insurance industry is shocked over recent news that Lloyds Bank has recently been fined $125 M for delivering “inaccurate” information over home insurance renewals. Customers were “misled” over a period of 8 years, which led to one of the largest fines imposed against a lender.
The breach involved a 9 M renewal communication from 2009 till 2017, according to the Financial Conduct Authority (FCA). Apart from that, an estimate of 500,000 customers were told that they were to receive a “loyalty” discount, which was never applied. Up until now, the FCA says that the company has paid about 13.5 M pounds to customers, who were told about the discount. A Lloyds’ spokesperson apologized in the name of the company, as they publicly recognized that the amount is being paid off to customers for the mistake.
As a result of all recent events, the company shares were down 4% on the day the FCA fined the company, according to Trading View; with the price now being £45.38, resulting in a -3.02% percent change. In addition to that a new regulation states that, effective 2022, renewal prices being offered to existing customers will not be higher than that of new ones.
Similar Occurrences with Similar Mistakes
The first incident is that of the $700,000 fine imposed on the insurance company AIA for misleading customers. The company is considered to be New Zealand’s largest life insurer. This Financial Market Authority (FMA) settlement is put into action, after the company admits making misleading representations to its clients. The case was taken to the High Court for communicating incorrect information to customers with life insurance and related policies.
Another infamous occurrence was that of the £4 M penalty that was enforced on Bluefin by the FCA. The FCA made no criticism of any other member of the AXA Group other than Bluefin. This £4,023,800 fine was enacted against Bluefin Insurance Services Limited (Bluefin) for failing to provide clear and not misleading information to its customers about Bluefin’s independence. During March 2011 and December 2014, the large insurance broker, which was fully owned by AXA UK Plc, set itself to be independent and claimed to be impartial in the insurers it recommended and the advice it provided.
The conflict regarding Bluefin’s independence was further escalated by Bluefin’s failure to implement adequate systems and controls. Bluefin’s ownership was not mentioned directly for the sake of a culture that promoted business strategies that focused on increasing business with its parent insurer, rather than treating Bluefin’s customers fairly. Customers were, hence, misled into believing that they were dealing with a broker that would pick policies based on unbiased search in the insurance market. Resolvedly, Bluefin agreed to settle and end the investigation at an early stage; resulting in a 30% reduction of the overall fine, which would have been £5,748,200 otherwise.
Consequently, Executive Director of Enforcement and Market Oversight, Mark Steward, later explained that it is “unacceptable” for firms to promote themselves as independent, when they are not. He, correspondingly, said that “insurance brokers must promote a culture in which they act in their customers’ best interests and provide them with the information they need to make an informed decision. This is central to the relationship between the industry and its customers.”
How Outsourcing Can Prevent This from Happening?
First you might need to know the five stages of the outsourcing process to know if outsourcing is a good decision or not ? and ask yourself the major five questions upon which you can decide on who will be your outsourcing company
- A good outsourcer can be picked with the help of many tools and utilities. One of which is through its quality processes and KPIs performance. An alignment of priorities can, then, be made between the outsourcer and the company in need of outsourcing. Ultimately, a sense of trust is shared between the two entities.
- In addition to knowledge management processes i.e. how training is administered and knowledge both captured and updated. Another way of preventing such mistakes is through risk-sharing, which only works in some cases.
The Problem in Depth
When the problem, though, is being dissected, a lot of questions arise: How did this happen? If such big companies fall prey to similar mistakes, how can this be prevented? Which entity was the one responsible for delivering information and communicating with customers?
- If it is the outsourcer. Then, a good suggestion is to know how to pick and invest in an outsourcer that adds value and does the work.
- If it is the broker/company itself. Was the firm too busy? Are things getting out of control due to overworked employees? This can be a frequent issue, unless you share your work with an outsourcer. Only then can you focus on your core tasks and leave the rest to your outsourcer.
Who is FLINK?
FLINK Solutions is an Insurance BPO (Business Process Outsourcing) company based in Egypt. We leverage our immense experience in insurance outsourcing, to deliver a variety of BPO Services for our clients in USA & Canada, What distinguishes FLINK Solutions is our guaranteed steady growth and amplification for our clients in the insurance industry.
With outsourcing your employees will then have the time to focus more on improvement and enhancement of your core business functions, with FLINK taking care of the rest. This way, you would be getting a 24 hour service to your insurance business.
