Posted: 19th September 2016
First published by Insurance Times
Within the insurance sector we are seeing growing pressure from senior leadership teams to reduce the cost and volume of complaints, while increasing efficiency and effectiveness in this area.
When you then consider the impact of the recent regulatory changes to complaint handling, it is clear to see why many firms are in the process of transforming how they operate.
It is important for firms to understand the true impact of these changes versus their intended objectives. As with any business decision, establishing clear return on investment (ROI) is key, but this isn’t straightforward in the complex area of complaints. Here, we unpick how firms can look at complaints from a value perspective.
The new ‘three day rule’ provides firms with an extended ‘informal period’ in which they can resolve complaints for their customers. Whilst this should hopefully mean more customers receive a timely resolution, firms must now report all complaints to the regulator, something that has resulted in many altering and in most cases tightening their complaints definition.
New rules, new opportunity
The rule changes have been largely welcomed by consumer groups as another positive step towards achieving a customer-centric culture across financial services. However, recent research undertaken by Huntswood has shown that 74% of firms feel the changes will increase the cost of handling their complaints. But how many firms have actually measured this cost and any potential benefit gained from a more customer-centric culture –to provide senior management with a robust ROI assessment in view of what they are looking to achieve in the complaints area?
With ROI on complaints often poorly measured, it is difficult for firms to fully appreciate the impact that operating model changes have on overall performance. The concept of a return on investment in the complaints space might sound foreign to many, but given the value in effective complaint handling (customer satisfaction, advocacy and brand loyalty – as proved in the Huntswood Complaints Outlook 2016) it should be something that becomes more common practice.
Types of data firms should capture
Firms must ensure they are collecting valuable baseline data and key performance indicators to illustrate cost, efficiency and effectiveness. When measuring the efficiency of a complaints department, firms should consider volumes, quality and timeliness of their operations. At the same time, customer satisfaction, bottom line impact and quality / speed of decisions provide strong effectiveness metrics. Capturing these things, in addition to costs, will help inform what future changes they should make to their processes and approach - and aid in evidencing ROI to internal stakeholders.
The lack of complaints-related data available means that firms are making decisions to change – and in some cases transform – their operating models without a clear view of what good looks like. With only very limited publicly available data on which to draw comparisons, firms struggle to get real insight into industry best practice.
Any firms striving to achieve excellence in complaints will need a clear view of what good looks like in addition to solid empirical data that is comparable, evidences performance and gives insight into where future investment can be targeted to yield the largest returns.
Ultimately, complaints departments in the insurance sector are undergoing significant change. If firms are to gain a real understanding of the benefits of these changes, then undertaking a robust assessment of ROI – that assesses the full impact – is key.