In response to the requirements of Directive 2013/11/EU on alternative dispute resolution for consumers (known as ADR), the insurance profession set up a unique mediation authority on 1st January 2016: Insurance Mediation. This new regulatory requirement has resulted in insurers reconsidering, in part, the organisation of their processes in place dealing with customer dissatisfaction.
Managing dissatisfaction: a lever for creating value
In a highly competitive context marked by increasingly high consumerist expectations, managing dissatisfaction is a major customer relationship challenge for insurers. The main challenges involved in managing customer dissatisfaction are:
Limiting the churn rate. When a customer expresses their discontent, which is a potential precursor of termination, they are empowering the company to retain the customer’s loyalty by proving the company’s ability to listen, show consideration, interest, and professionalism. The challenge for the company is huge; the cost of winning a new customer is on average 5 times higher than the cost of retaining the loyalty of a customer in the portfolio.
Increasing the value of the portfolio. In its multi-sector study on managing customer dissatisfaction, BVA highlights the existence of a “WOW” effect. A customer who considers that their claim has been handled in a satisfactory manner will be more likely to promote the brand and to purchase a new product than a customer that has not had any issues over the past 12 months. Sound management of customer dissatisfaction is therefore also an effective lever to increase the value of a company’s portfolio.
Improving commercial practice and the products proposed. The information collected when a customer expresses their dissatisfaction is a vector for improving the products and services proposed by companies who receive it.
In this way, companies can work to ensure the continuous improvement of the quality of the services rendered and/or products and to protect themselves from new cases of dissatisfaction. To make the customer dissatisfaction management process a real lever for creating value, companies must have effective tools and processes in place to enable complaints to be processed correctly.
A process for managing customer dissatisfaction already highly regulated
In the insurance sector, the process for handling customer dissatisfaction is very highly regulated by recommendation 2015-R-03 of the French Prudential Supervisory Authority (ACRP). It defines a certain number of recommendations and best practices aimed at insurers, particularly concerning the provision of clear and transparent information for the customer, equal and harmonised processing of complaints, and the implementation of corrective actions based on actions identified during the complaint handling process.
A complaint can be defined as follows: “a statement formalising a customer’s dissatisfaction with a professional; a request for service or benefit, a request for information, clarification or a request for opinion is not a complaint”. This recommendation also includes the expectations of the ACPR concerning the various appeal procedures, particularly mediation.
Even though there are differences in the organisation adopted by insurers for managing customer dissatisfaction, the recommendations of the ACPR enable the sector to share a common framework. In this way, the process for dealing with customer dissatisfaction is split into two generic phases: the complaint, and mediation.
- The complaint phase: during interactions with individuals normally in contact with the insured party (account manager, administrator, etc.), the insured party may need to express their discontent. If the complaint cannot be dealt with immediately, the insured party then has the possibility of escalating it by contacting customer services for example. The insurer then has a period of 10 days to acknowledge receipt of the complaint and has 2 months to provide a response.
- The mediation phase: final out-of-court resolution of disputes, this enables the customer to access an alternative and free remedy which is carried out by an independent third-party. It offers both the insured party and the insurer the advantage of avoiding a settlement before the courts, thereby avoiding a procedure which could prove long and costly. Prior to 1st January 2016, companies working in the insurance sector had two options:
- to enlist an “internal” mediator (or company mediator). This was particularly the case for AXA, CNP, Generali, Groupama, the GMF and MMA who opted in favour of their own company-specific mediator. Each insurer could freely set the methods for appointing a mediator, however the criteria relating to independence and competencies had to be respected;
- or to enlist the support of sectoral mediators of the GEMA (Professional Union of mutual insurance companies) or the FFSA (French Federation of Insurance Companies) according to their membership to one or other of these bodies.
The impacts related to transposition of the ADR directive
Since 2005, the number of mediations counted in the insurance sector by the various mediators has continued to grow. The transposition, on 20th August 2015, of the ADR European Directive opportunely allows the insurance sector to implement a unique mediation service, shared by all insurers and their intermediaries.
In order to prepare for the operational implementation of mediation in the Insurance sector, the mediation authorities set up by the GEMA in 1989 and the FFSA in 1991 have, since 1st September 2015, been grouped together within the same authority: Insurance Mediation.
The mode of operation of the Insurance Mediator is defined by the 10 rules of the Insurance Mediation Charter, and insurers affiliated with the GEMA or FFSA had up until 1st January 2016 to align their processes with the new mode of operation. It is now no longer possible to use another mediation authority for disputes covered by the Insurance mediator.
As part of the process for dealing with requests for mediation, insurers have a maximum period of 5 weeks to respond to requests. It is the Insurance Mediator’s responsibility to give their opinion within three months.
The insured party retains the right to bring a case to court at a later date. All insurers affiliated with the GEMA or FFSA must therefore adapt their communication with their customers to take account of the change in representative.
Change management must also take place with colleagues usually in contact with the clientele and those authorised to manage the complaints made by insured parties.
Although the implementation of mediation in the insurance sector is only one link in the chain in managing customer dissatisfaction, it may also be the biggest catalyst for change for insurers.
Is it desirable to compete for a customer who has just an initiated a complaint or mediation? The message for the customer would not, in this case, be viewed positively. In the insurance sector, these data are only very rarely collected in customer reports and used as a filter as part of promotional campaigns.
For numerous players, considerable improvements can still be made to the process for managing dissatisfaction. In 2014, the customer was referred back to the insurer on the basis that the internal legal remedies had not been exhausted, in 42% of cases for the mediator of the GEMA and in just over 23% of cases for the mediator of the FFSA. Again, the message for the customer may not appear clear.
It should also be noted that, although free for the insured party, mediation comes at a price for the insurer. Few insurers have a clear idea of the cost of the process for managing customer dissatisfaction and on the impact that it may have on the churn rate.
Towards digitizing the process for managing customer dissatisfaction
For most insurers, a complaint is filed by post. This paper approach has a significant impact on the processing time frame, as well as the resources mobilised (particularly in terms of entering complaints into professional applications and analysing files).
The insured party has the option to send their complaint via all types of channel (post, telephone, email, social networks, etc.) which makes the process increasingly more complex for insurers, both in terms of formalising requests and managing the various types of flow.
As data collection is a key step in the complaint management process, certain insurers have chosen to offer a codified option to their insured parties. This is particularly the case for Allianz and AXA who offer their customers the opportunity to send their complaint via their website using an online form.
This method of digitising the customer journey in the case of a complaint enables insurers to have access to information related to the insured party’s claim in a format that is easy to use.
This information is then used by the insurer to enable the claim to be quickly processed and to facilitate the integration, whether automated or not, of these data into the customer’s information database.
Even though the challenges may differ, the Insurance mediator also favours this approach, in addition to post and email, to facilitate its submission to court.
With its expertise in the insurance and social protection market and backed by the completeness of its offer, Sopra Steria provides its customers with the opportunity to be a competent partner in their search for operational effectiveness and competitive advantage.
As part of the process to implement mediation within the insurance sector, Sopra Steria supports insurers in order to transform the new regulatory requirements into strategic, operational and IS opportunities.
Latest posts by Eric Dartiguelongue (see all)
- Managing customer dissatisfaction in the insurance sector - 19 April 2016