VIEW: Public opinion and the risk manager

Every risk manager measures conduct risk with more than half an eye on the regulator, and for good reason. However, regulators do not always have the last word in how their rules are interpreted; they are accountable to politicians, and politicians are accountable to the public.

As the deadline for PPI approaches, we are reminded of a product that gradually became less and less tolerated by regulators as public opinion hardened against it. So if it’s the public, and not the regulators, pulling the strings on conduct risk, how do we know where its judgement is heading? The public doesn’t publish guidance or thematic reviews, so how can we gauge what may be in its sights?

At the CII, we’ve made an attempt to identify the pinch points in the public’s attitude to insurance and insurers (and, by extension, what the key areas of conduct risk are now and into the future) with a tool that we call the Public Trust Index.

Through a process of interviews, video diaries and other qualitative measures, market researchers at Deliberata identified nine key areas of trust in retail general insurance, from price and speed of claims, to respect shown to the customer during the claims process. They then tested the potential for improvement against these nine factors through a survey of 2,000 consumers and 1,000 small businesses.

Unsurprisingly, the loyalty factor showed the most room for improvement. It’s a useful reminder that it’s frequently collective conduct that really shapes public attitudes and regulatory responses.

Reintroducing a stronger sense of loyalty to customers is an issue that the ABI and BIBA are addressing through their Guiding Principles and Action Points for General Insurance Pricing. This provides the basis for the profession to eliminate ‘excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers.’ In a world where public opinion rules, it is this kind of collective action that makes by far the biggest contribution to managing conduct risk.

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