The UK regulator (FCA) has strict requirements for insurers to manage conduct risk, that is, ensuring fair customer outcomes. There is a growing expectation by the FCA to see conduct risk dashboards in place that proactively manage conduct risk in line with the FCA rules.
It is therefore critical for insurance intermediaries to ensure fair customer outcomes because they are in a business of selling promises. The payouts come much further down the road and in a stressed situation (when the risk has crystallised).
A fair customer outcome can only happen when customers buy exactly the cover they need; not over-covered (paying too much) or under covered (paying for something they can’t claim against).
Conduct risk associated with selling to millennials
According to Wikipedia millennials are people born in early 80’s to early 2000, so it turns out I am a millennial.
I don’t recall anyone fussing over Generation X’s “lack of awareness” when it came to insurance. There were no blogs dissecting why GenX weren’t buying insurance or panels debating the merits of GenX risk awareness. So why are they picking on us millennials?
10 year ago I didn’t care about insurance, didn’t need it. The assets I owned (mainly a computer) depreciated faster than I could use it. No car. No dependents. When I traveled (mainly Europe) I was forced to get one of those European health insurance cards from NHS. But as my risk profile changed in the last couple of years (mortgage, marriage, kids), I actively looked or was told to mitigate my risk through insurance.
So why is it that we are so worried about the younger millennials? Why can’t we simply wait for them to grow up? Surely they will start engaging with insurance when they are ready!
Short Answer, insurers want to sell to millennials because they want to sell online!
Here is what I reckon happened: Insurance sector hired marketing gurus from e-commerce companies to help them migrate to the www and sell insurance online. Armed with their growth hacking toolkits and past experience, these gurus started focusing on the demographic most active and likely to buy products online. And thus began the crusade of educating millennials about insurance, particularly the younger members of our cohort.
Just because you have access to a billboard in a schoolyard doesn’t mean you try selling Marlboro lights to kids! A little exaggerated but you get the point.
This is not to say that there aren’t millennials who need to be educated, there definitely are, I was one.
Process-first approach over outcome-first approach to managing conduct risk
What fascinates me, as a risk and compliance professional, is how an outcome-first approach has introduced unintended risks in a business. In this case, sales first approach is exposing insurers to a potentially material conduct risk issue down the line.
At CoVi we firmly believe in a process-first approach when it comes to managing risk and compliance, particularly conduct risk. Customer feedback is paramount in refining and evolving an insurance product, but don’t let the tail wag the dog by building products for a demographic (millennials) simply because your marketing team has access to them.
See how CORE is helping startup and intermediaries proactively manage conduct risk in a simple and accessible manner witout confusing business teams with complex compliance language.