From my early days leading the handling of insurance disputes at FOS I saw complaints about the price of insurance premiums. At the time, neither the industry nor the ombudsman had much sympathy with the consumer's position, feeling that in an open and competitive market the consumer was free to decline cover and shop around if they felt the price they were being offered was too expensive.

But it was clear that many, for whatever reason, had become stuck in a cycle of renewal and were paying far more for their cover than they would have if they had changed insurer.

We set about investigating what was fair in the world of insurance premium pricing and I spent a number of years leading staff investigating all types of pricing disputes, talking to insurers and consumers, and creating decision making policy on the issue.

The CAB super complaint has dropped a large stone in the pond and the ripples are still being assessed by the FCA. But what's clear is that regulatory oversight is firmly focussed on the issue and change is expected in the industry. In its preliminary findings the FCA has challenged insurers to rethink their regulatory requirements to treat customers fairly and expects consumer fairness to be a key focus at senior leadership levels.

While the focus of the super complaint was the concept of a "loyalty penalty" - or market "inertia" as we called it at FOS - I've seen first hand that issues of unfairness arise in many other aspects of insurers' price setting models and operational practices. In some instance it's clear that there are cultural issues throughout the consumer pricing journey, and beyond, which have been impacted by macro economic models that, as the FCA confirms, have lost sight of the insurer's wider responsibilities. 

Undoubtedly pricing models are going to need to change but the necessary changes will, for some, have major ramifications, affecting overall business strategy and marketing and the relationship with intermediaries of all types. And those changes will need to be reflected in cultural change programmes as much as in operational structure and strategy.

With more than 20 years as a senior operational leader, and over 6 years in insurance dispute leadership at the FOS, I have the experience and skills to help.

I'd be delighted to have a preliminary conversation with you to help in your planning and to consider how I'm able to provide support with:

      -    understanding the ombudsman's approach to pricing fairness

      -    understanding regulatory requirements

      -    identifying change requirements throughout the consumer experience

      -    delivering operational change projects

      -    interpreting what "fairness" looks like and how to deliver it, including cultural change

      -    visualising and designing strategic change with fairness in mind

      -    meeting the regulators expectation of embedding "fairness" at senior levels

      -    dispute resolution on complex cases needing expert input

      -    ensuring complaints handling meets regulatory objectives

      -    making the most of complaints as part of a quality assurance model to drive improvements    

Please feel free to contact me by telephone or e mail to discuss your needs.

John Withington

These are interesting and challenging times in the world of insurance. With the travel industry brought to a grinding halt, and many other companies experiencing demand slumps, there's a lot of people reaching for their personal and commercial insurance policies to see what protection they have. No doubt insurance claim lines are seeing unprecedented traffic in these strange times.

But as many are now discovering, insurance policies don't provide unlimited protection. Whatever the policy holder imagined, the reality is that contracts of insurance specifically include and exclude plenty of things and sadly it's often only when the unthinkable happens that many people actually get to understand the detail contained within those documents, sat unread or carefully filed away.

While the Association of British Insurers (ABI) seeks to set out the contractual position, and explain the reasons why many business interruption policies might not cover the effects of COVID-19, there are calls in the media and across the political spectrum for insurers to "do the right thing" and deal with claims fairly and quickly. The ABI offers that only a small number of policies will likely cover loss, arguing that even where cover for loss as a result of pandemics exists within the policy, it might often be limited to named pandemics only and, for example, only cover business interruption due to business premises being directly affected by the presence of a disease.

Ultimately, what's "fair" is a subjective decision. When complaints go to the Financial Ombudsman Service its remit is to decide what's "fair and reasonable". That means that while contractual wordings are fundamental, they aren't considered in isolation.

The challenge for an insurer is to apply the right balance in the way it handles claims. That means deciding what claims it's reasonable to pay taking account of what policy holders were entitled to think was covered by their policy; based on how products were sold, what the parties' intentions were, the clarity of insurance documents, the wording of the contract and, no doubt, some corporate level economic and customer care policy considerations. Ultimately, though, what is fair? It will vary across claim and policy types and may differ substantially between individual claims.

At Entry-Exit Consultants we can help. With many years experience of leading the ombudsman service's handling of insurance disputes John has an unrivalled insight into the interpretation of insurance claims and deciding what's a fair and reasonable outcome. Whether you need to develop a policy approach across a body of claims or need help to handle individual potentially high value cases. John's unique combination of operational and policy-setting experience in high volume and complex complaints handling, and insurance disputes specifically, is available to support you.

In 2018 I was approached about an assignment that at first glance looked decidedly unattractive.

A consortium of Dutch gas producers was seeking to overturn a tariff decision that had already been reached by the regulatory authority on the basis of the evidence and agreement of two major pipeline operators. The decision was a relatively complex package of elements supported by a large and well-known international consultancy whose report, artfully combining best EU regulatory practice with the promise of benefits for all, had been met with almost universal acceptance. Except my prospective clients, who would end up paying more and wanted me to challenge some of the assumptions in the report to perhaps weaken the regulator's resolve. 

Aside from having to overcome language barriers in a complex technical area, my contacts in the industry were confident that the deal was done and the commission looked pointless. But the realisation that ordinary Dutch consumers were going to end up paying more money as the result of this scheme led me to take a closer look.

On first reading the report appeared persuasive. Setting out to streamline administration and facilitate international trade as well as appealing to EU regulatory objectives such as the expansion of the Dutch gas balancing zone. Its interlinked proposals included removing from the tariff map a seemingly “unnecessary” point of interconnection between one pipeline operator and another. A bit like taking the toll booth away from a motorway junction. On the face of it, smoothing the passage of traffic and reducing the need for yet another pricing calculation. But removing this toll would mean that the clients’ costs would go up elsewhere to cover that loss of revenue.

There were a number of parts to the package but as a whole the report sold the end product very well. It would facilitate cheaper virtual imports of gas as well as physical exports, and deliver efficiency savings for the whole regime. The report recognised the “unavoidable” consequential loss of revenue to the national pipeline operator, which would naturally enough have to be met by a “very small” increase on everybody else’s gas transport bills. The regulator had been persuaded by the net present benefit calculation of the whole deal.

We were expected to challenge the calculation of assumed benefits but what really interested me wasn't the accuracy of the report's conclusions, but the basis on which it had been commissioned in the first place. I started unpicking the premise of the report. What exactly had the consultant been asked to consider, and how free a hand did they have to look at a range of solutions to the problem posed by removal of the revenue associated with the interconnection point? It started to look like perhaps they had simply been given a solution – let the ordinary gas customer pay - and asked to justify it from a public interest perspective.  

I found myself recalling an old Forbes article on the science and marketing of bundling of products like TV packages. And more recently the scandal of the 2007/8 financial crisis and the role of collateralised debt obligations (CDOs). What these very disparate things had in common was that there'd been a bundling up of the good stuff with the bad stuff, and people had been persuaded to buy the package as a whole without looking too closely at all the constituent parts.

And then the penny dropped – break the package down and ask the question, why does each bit need to be included, what’s it actually costing, and for what value? And then, how could you put a different package together that delivers what is really needed at a fair price? Although there was still a lot of technical detail to address - such as theoretical arbitrage opportunities for virtual imports and physical exports of gas between two major traded hubs - the battle was essentially won from that moment of insight. In fact we didn’t even need to challenge the level of claimed benefits any more – we could simply use the report’s own values and achieve a better net present value by changing the package.

So whenever you're confronted with an expensive bundle tied up with a pretty ribbon, do some rummaging around before accepting it. The issue you need to consider isn't whether the end result is acceptable, or even attractive, but rather whether it delivers maximum potential by being  put together properly with consideration for ALL of its impacts. And if you're the one putting the package together? Well, ask yourself if it's really worth the reputational damage of alienating the customer, and whether you're truly meeting the spirit of your regulatory objectives, however clever the design and marketing of the bundle may be?

Brian Withington