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28 May 2020 5 min read

Covid-19: The hostage experience – a catalyst for customer engagement in the Life, Pensions and Investments sector

David Hughes

David Hughes
Director | Financial services | London

Katharine Williams

Katharine Williams
Partner | Financial Services | London

A journalist writing for Le Monde spoke to a set of former hijack victims. One of the interesting findings was an abnormally high occurrence of divorce in couples that jointly experienced the hostage situation. This curious situation is about to play out across the Life, Pensions & Investments sector as Covid-19 has quite literally been holding us hostage. It will undoubtedly be a catalyst of fallouts between providers and customers across the industry as customers’ eyes are opened.  

The Hostage Situation 

The journalist probed the couples as to why they had divorced as a result of their hostage experience. Most of the participants reported that they had not contemplated divorce prior to the hijack. “During the horrifying episode, however, their eyes opened and they saw their partners in a new light. Ordinary good husbands proved to be selfish creatures, caring only for their own stomachs; daring businessmen displayed disgusting cowardice; resourceful men of this world fell to pieces and did little except bewailing their imminent perdition” [1] (Zygmunt Bauman).

Latent Problems 

For the last 10 years or more, providers have been saying that they need to do more to engage with customers, using “new” channels and leveraging digital. The truth is that the industry is torn between actively engaging customers and sticking to the annual statement. There is a real risk that waking up the customer base may lead to a number of the big players losing out where they don’t have the ability to provide simple products or are not able to surface meaningful data in order to service large volumes of customers. Now more than ever is the time for organisations to rapidly pursue the digital engagement of customers through simple products. The majority of the population don’t want to pay fees for advice, preferring instead to ask friends and family, or inform decision making with simple, consumable online information.  

The Fallout

With Covid-19 damaging global asset values, many people in drawdown, retiring in the next couple of years or alert to the impact on investments will be worried about their future provisions. People want to understand what it means to them and how they can navigate the best path through it. With 645,000 people retiring annually [2], there will be swathes of calls to contact centres that are operating at best on a reduced operational capacity, further frustrating people as they wait for phones to be answered only to then be told “we can’t provide Advice but we can send you a valuation in the post in the next couple of weeks”. It’s at this point the strain of the situation starts to impact the industry. Complaints and attrition rates rise when customers are at their most vulnerable and cannot find help.  

Fight or Flight  

Changes in earnings, unemployment and decline in portfolio value all create immediate and long-term risks. This is recognised across the general public. 23% of adults said Covid-19 is affecting their household finances, 33% said they had needed to use savings to cover living costs. 25% said they were unable to save as usual and 20% said their savings value is being affected [3]. Confusion and discomfort is triggering heightened customer consciousness and more attempts to engage with the industry. As such, Covid-19 could become a significant catalyst to service and engage with customers effectively or watch them leave. It will drive the industry to re-benchmark customer needs and expectations on how they interact with providers. Who they choose to interact with will be based on their ability to get real help, insight and advice in order to manage their assets now and for the future. They want someone who will fight for their needs in the hijack situation.  

How can providers avoid the ‘divorce’ scenario? 

Industry trends indicate that customers are looking for up to date information about their assets and gain access to guidance or advice (with a small “a”) so that they can make informed timely decisions. However, the promise of the ‘Pensions Dashboard’ and other industry wide silver-bullets are unlikely to be here any time soon due to the myriad of legacy systems and the quality and accessibility of historical data.  

The industry is behind almost all other sectors but has an immediate opportunity to transform operations in line with the ‘new normal’. This is an opportunity to change at pace, leveraging learnings from Banking, Energy and Retail Operators as well deploying new technology quickly. This change to meet a set of customer needs accentuated by Covid-19, will have to be driven from within the industry itself. Without this, providers risk falling someway short of customer needs both now and in the future as they look to someone else to fill the void.  

More than just information 

However, it’s not just about creating an online wealth of information, simplification is required too and in large doses. Regulatory efforts to drive simplification have only partially landed: the pension simplification of 2006 and pension freedoms introduced in 2017. Whilst some new entrants and existing providers have created simpler offerings, customer experience is typically still too complex. Products are laden with jargon and confuse customers by highlighting niche technical differences as unique selling points. Often they are a re-hash of what has existed for years. The experience needs to be simplified so it can be more easily understood by the majority and products can be confidently transacted. The required base is a high degree of common features and terminology across providers, making them easier to compare and view as a holistic portfolio so the client can achieve what they need to.  

As a result of Covid-19, low interest rates, furlough or the risk of redundancy, pension and savings contributions will likely decline. Over 50% of jobs at risk are in lower income brackets but the impact of Covid-19 will reach higher earners too [4]. Combined with potentially challenging market conditions, all types of customers will need the support of the industry more than ever as they enter a period of vulnerability where they may make decisions that hugely sway their ability to manage their own longevity.  Getting the right engagement model and products for the rapidly emerging future is both key to serving and engaging customers effectively during this turbulent period, but will also be key to maintaining a relationship.

The message is clear, set up operations, customer experience and products in a way that customers can meaningfully engage with and trust in their hour of need, or risk customer attrition. 

Please contact David Hughes or Katharine Williams for more information on Baringa’s customer engagement expertise and how we can help you on your customer experience journey.  

About the authors: 

David Hughes is a Director in Baringa's Insurance Technology practice, Katharine Williams is a Financial Services Partner in our London office. 

The authors would like to thank Gavin Vollmer for his contributions to this article.