Sep 10, 2013 2 min read

Ethics, Insurance and innovation – Part 1 – why change seems inevitable

Claims operations in the UK are under a lot of pressure to reform their working practices. The next few years should therefore see the scrapping of a number of questionable practices. So how will insurers generate all that innovative thinking around the new practices that will be needed? And more importantly here, how will they ensure that those practices criticised in the past aren’t just given a new wrapper and allowed to continue as before? The answer could lie in the relationship between ethics and innovation.

Let’s take a quick look at just how much pressure claims operations are under to reform. First off, there’s the Competition Commission’s investigation into certain motor claims practices. Then there’s the thematic review being conducted by the Financial Conduct Authority into personal lines claims. And, bursting in to fire the occasional broadside, the Home Affairs Committee and the Transport Committee of the UK Parliament, both of whom have been conducting reviews into various aspects of how claims departments work.

Even the insurers’ trade body, the Association of British Insurers, recognises that motor claims is in need of significant reform. One leading claims director added an interesting call of despair recently (in relation to subrogated motor claims) saying “If we can’t trust each other, why should we expect our customers to trust the industry?”

Motor insurance, and the way in which claims are settled in the UK, seems to have hit a reputational low. Yet doesn’t this also present a wonderful opportunity? If change is inevitable, why wait to be ordered to change how you work by the authorities? There are a host of technological and operational innovations going on out in the wider business world, brought on by the rise of smartphones and big data, to name but two. Add to that the many new ways of developing relationships with your customers. Isn’t now the time for insurers to redesign their claims operations and come up with some really innovative changes, so as to leapfrog the regulatory stipulations and gain competitive advantage and brand distinction?

Innovation however isn’t something that most insurers have a great reputation for. Yet that hasn’t put them off wanting to try. A survey earlier this year by PwC found that global insurance CEO’s were taking steps to help their people embrace innovation. And one of the steps nearly two thirds of them were taking as part of this ‘embrace innovation initiative’ was to strengthen their firms’ culture of ethical behaviours.

So how does a culture of ethical behaviours strengthen a firm’s capacity to innovate? That’s what I explore in my next post.

Duncan Minty
Duncan Minty
Duncan has been researching and writing about ethics in insurance for over 20 years. As a Chartered Insurance Practitioner, he combines market knowledge with a strong and independent radar on ethics.
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