I recently experienced, not for the first time what this can mean to the customer when my own company’s group risk insurer finally got around to issuing the renewal documents, in March 2008 for our policy which was due for renewal in August the previous year. This is not the first time that I have experienced such difficulties; only last year I had to lodge a formal complaint over a similar incident.
In my view it is totally unacceptable that employers should have to experience such appalling service on a regular basis. I am told by my IFA, John Joseph Financial Services, who I would say are always a shining example of efficiency, that mine is not an isolated case. Where service is so poor ought not the FSA to be taking some action?
Many other providers will willingly admit that the level of service on group risk contracts has deteriorates to a degree that would be totally unacceptable for any other part of their business. Many reasons are cited for the difficulties group risk providers experience, including the problems caused by so many contracts having renewal dates that coincide with the end of the financial year.
By comparison group pension arrangements rarely experience similar difficulties, yet with the exception of occupational information the data set used for renewals is almost identical. Over the last decade we have seen a massive transformation in the way that group pension arrangements are established and maintained. Indeed from the feedback I receive from many large pension advisers and benefit consultants, the quality of the technology services in this area has now become the single most important factor in the selection of a provider. If a pension provider cannot provide the right technology services they simply will not make it to the short list to be considered for new business. From the renewal perspective this invariably involves the insurer receiving an extract of an employer’s payroll data to process payments.
With so many advances achieved in the group pension market I cannot help but think that as an industry we are approaching group risk in the wrong way. Most insurers and advisers treat it as a separate class of business and operate separate teams and infrastructure for each of these business types, yet there appear to be some very obvious synergies that could be achieved by bringing at least the administration of the two product classes together. Yet the level of customer service presently being achieved across the industry suggests that customers are paying the price, in terms of poor service, of inefficiencies in the current market. Anyone with even the most cursory knowledge of the FSA’s Treating Customers Fairly initiative must recognise that this is a ticking time bomb which is likely to explode, almost certainly accompanied by some eye watering fines.
By reusing the technology they have already deployed in the group pension market it should be possible to drastically improve the efficiency of their processing with obvious advantages to all involved. In conversations with advisers I have come across many firms who are very reluctant to let insurers deal directly with their clients. Yet contribution collection in the pension market is almost invariably now processed this way. If the provider community made better use of its existing renewal technology it is conceivable that they would increase adviser confidence in their having a direct dialogue.
The changes outlined above would obviously have significant benefits for those insurers that have invested in group pensions technology while putting any group risk players who do not operate in the pensions market at a distinct disadvantage; perhaps they would need to partner to achieve such economies and piggyback other providers’ technology. Alternatively there might be a role for an outsource service to help such providers. I believe it is time for all group risk providers to recognise that the current level of service in their sector is simply unacceptable. The mechanism with which to improve things is already in their hands.