Improving customer experience in the pensions space

Experian hosted the first of a series of Life Insurance and Pensions Dine & Discuss roundtable dinners at the Savoy in London on 18th November.

Topics ranged from ageing population, data security, increasing consumer engagement and how innovative staff can be attracted and retained. However, the evening’s key question was to what extent improving customer experience can help address some of the challenges associated with April’s pension reforms.

Why is customer experience important?

Nearly £3bn having been withdrawn by over 55s since April (1) suggests that the work to deliver on the key consumer choice objective of Pension Freedoms has made a promising start. The industry is responding by broadening product offers while business models that relied on policyholders being locked-in for decades have been rapidly turned on their head.

With 1.8 million smaller employers (2) obliged to enrol their employees on a workplace scheme by 2018, providers that deliver great customer experience can take a bigger share of this growing market. Those that don’t will suffer crippling outflows and reduced margins.

Consumer expectations are changing. Disruptive entrants such as Uber and Airbnb have become the biggest players in their respective markets by offering great customer experience to consumers that are willing to accept a little extra potential risk.

The significance of brands achieving major success in the sharing economy  should not be lost on a sector where many major players were formed as mutual cooperatives. How long before an emerging provider, not burdened by legacy technology, harnesses the power of mass peer-to-peer connectivity via the internet to become a serious player in the long-term savings space?

What can be done to resolve these issues?

Many life/pensions providers could be accused of imposing controls that are disproportionate to the ‘real’ level of risk. For example, is it really necessary for a policyholder to provide multiple ID documents when changing their address, if the same controls are again imposed where the ‘true’ risk exists at the point of a consumer drawing-down funds?

Conversely, most providers are happy to accept a certified bank statement or ID document copy with little due diligence of whether the document is genuine when robust electronic checks can be performed quickly and easily.

The Retail Distribution Review has left many new policyholders being on-boarded via self-serve, digital (even automated-advice) channels. The industry can do well to learn from the experience of banks where 85% of individuals that start the process to open a new current account will abandon the process due to friction along the way.(3)

Luckily most ‘stumbling blocks’ such as requiring a would-be customer  to provide paper ID documents via post or to invent multiple security questions/answers can be streamlined and at the very least moved up-stream so that the minority of clients who fall into the manual channel will find out quickly, rather than after investing time entering multiple their details online.

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1) HMRC – 28 October 2015 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/469888/Pensions_Flexibility_October_2015.pdf
2) Pensions Act 2008 – http://www.legislation.gov.uk/ukpga/2008/30/contents
3) McKinsey – http://www.mckinsey.com/insights/organization/the_moment_of_truth_in_customer_service