Flight to price over quality is harming both buyers and carriers warns insurer

Mr Cooter, who is responsible for managing the UK regional network for Brit Insurance, believes that the ‘madness’ of the UK’s popular TV talent show, The X Factor, has permeated the insurance industry.

“Pitching for business has become a bit like The X Factor—if you decide that your only strategy is to appeal to the lowest common denominator in the hope of winning the business then you’re stuck on promising to deliver your product at the lowest price,” he argued.

“And like The X Factor, the appeal soon fades when the client discovers that their choice of insurer promises more than they can deliver,” he added.

hide

But the blame should not lay solely at the door of the insurance industry, Mr Cooter argued. In recent years, this flight to price has even extended to clients with complex needs who annually spend in excess of £250,000 on insurance premiums, he explained.

“Many appear to be making price-based decisions as if they’re shopping for private motor insurance. As a result, this has created a downward spiral in our industry in terms of producing high quality products. And with so much commoditisation in the insurance sector, we’ve almost lost the ability to differentiate our products on the grounds of service quality. In the long term this minimises choice for clients as well as damaging the credibility of our industry,” he warned.

Other factors such as brand and product quality should be important factors for buyers and are key if the insurance industry is to maintain quality, he continued.

“If you look at the professional services sector, such as law or accountancy, then clients understand the value of quality in terms of instructing a firm that has a strong reputation in their sector. They wouldn’t select a firm operating above the local launderette just because they’re cheaper!” he exclaimed.

According to Mr Cooter, the solution lies in building sustainable client relationships for the long term and for Brit, a re-thinking of its client proposition.

“For key clients, this means exploring new ways of making a real difference to them by understanding their specific needs and tailoring our proposition accordingly. This has to be a better way than trying to strip things down to the minimum acceptable standard at the lowest possible cost,” he said.

Mr Cooter will be speaking at Marketforce and the IEA’s 11th Annual Conference in London next month.