Improving access to insurance

Speaker: Christopher Woolard, Executive Director of Strategy and Competition
Location: FCA Offices, London
Delivered on: 20 June 2017

Highlights:

• In our previous work, we have found there are a range of access issues that can impact consumers. In insurance, these are particularly prevalent for people who have, or have had, cancer and other pre-existing medical conditions.  
• We want to understand the market and consumers’ journeys better and have launched a Call for Input focusing on access to travel insurance to also get views from firms and to seek innovative solutions to these issues.
• This is an opportunity for the industry, regulators and consumer groups to work together to produce meaningful change for vulnerable consumers.

Note: this is the speech as drafted and may differ from delivered version.

I am delighted to be able to open today’s Cancer and Travel Insurance launch event.

As I hope I will be able to convey to you in the next 10 to 15 minutes, this is a complex but important issue – and one that we are keen to find solutions to.

Being able to access financial services is critical for people to fully participate in society.

Last year, we published an Occasional Paper exploring issues around ‘Access to Financial Services in the UK’[1]. 

This is a complex but important issue.

We’ve seen consumers who had good access to services in the past finding they have become marginalised today.

Through this work we have spoken with a range of stakeholders and have heard repeatedly that access issues are particularly prevalent for consumers with cancer in the travel insurance market. Of course access issues are varied, and are present across different financial markets.

From our discussions with the industry, consumer groups and colleagues at the Financial Ombudsman, we believe there is a broad read across from access issues experienced by those who have, or have had cancer and other pre-existing medical conditions in both travel insurance and other protection products. Therefore, whilst cancer is the main focus of today’s event, we are using this as a starting point to encourage a much wider conversation.

The report we have published today starts this conversation and describes the difficulties of those who are or have been suffering from an illness in finding insurance that meets their needs – either at all, or at a price they can afford.

So what are the challenges?

The aim of today’s event is threefold: to make sure we all share the same understanding of the issue, to make sure this issue is, and remains, firmly on the agenda for the industry, and begin to work out how to take action.

I want to start my remarks with two statements of what may be the blindingly obvious. First, a cancer diagnosis can be life-changing for anyone. And second, being able to access financial services is critical for people to fully participate in society.

On the first - it’s difficult to put into words the profound effect a cancer diagnosis has on those affected, their families and friends. Most of us probably have some first-hand experience. By 2020, almost 1 in 2 of us will get cancer in our lifetime.

Whilst we’ve seen incredible innovations in treatments, statistics from Cancer Research tell us that someone in the UK is diagnosed with cancer every two minutes – each of these diagnoses represents a separate tragedy for an affected family.

Even for those who do recover, we all know the effects last longer psychologically and post-surgery insurance is only one comparatively small issue compared to the enormity of cancer. But finding out that you cannot travel - whether it’s for work or leisure - because you still cannot get insurance, shouldn’t be one of the issues people face.

Nor should consumers who don’t fully understand the exclusions in their policy travel without adequate coverage. Nor ultimately should people be frozen out of a market most of us take for granted.

Something isn’t right here and that is why we have written this paper.

At the same time this isn’t simple. We do not expect insurance firms to operate as charities. Indeed they need to be profitable and economically strong to perform their vital task.

In Our Mission[2], which we published in April, we talk about basing our regulatory approach on harm. We also talk about vulnerability and how we think about vulnerable consumers – it is obvious in this case that we have a group of vulnerable consumers who are suffering potential harm. Today is about how we start to put this right.

In the FCA Handbook, we set out 11 principles of good business. These are intended to ensure the firms we regulate behave in a manner that leads to the best possible outcomes for markets and consumers.

I’ll stop short of listing them all, but these conduct principles include a requirement for firms to behave with integrity, to conduct their business with skill, care and diligence, and to pay due regard to customers interests and treat them fairly.

Solutions will ultimately come from stakeholders who are willing to change or adapt to solve the problem. We all have a responsibility to help drive that change forward

However the right answer isn’t always to reach for the rulebook. In general, it is not desirable to live in a world where we mandate firm behaviours.

Today is about bringing together the diverse set of stakeholders.

With a complex problem like this, solutions will ultimately come from stakeholders who are willing to change or adapt to solve the problem. We all have a responsibility to help drive that change forward.

The consumer journey

Let me give you one example from the paper.

Alison was diagnosed with terminal cancer, and has been given two to five years to live. Cancer aside, she is in good health day-to-day. She wanted to go on holiday with her family and friends, on a cruise. And her consultant wrote her a letter to say she was fit for travel.

Yet Alison could not find travel insurance. And when she eventually found insurance, she was being quoted as much as the cruise itself.

She even found that being listed as the ‘organiser’ of the trip meant some of her family members couldn’t secure their own insurance. At no point was Alison signposted to better deals which might have helped her.

Alison’s experience is typical of the stories we have heard from consumers, either directly through our research or our engagement with stakeholders like Macmillan.

Consumers who have a pre-existing medical condition may find that insurers will not cover them at all, or will charge significantly more to do so because of their being classified as a ‘non-standard risk’.

Other issues we’ve come across include being offered complex exclusions or having difficulties even locating specialist insurers who might be able to adequately cover them.

And all of this leads to suboptimal outcomes. Cancer sufferers are left with a pretty dire choice. Travel and pay the inflated premium, cancel the trip altogether, or travel at risk. In fact a recent Mintel survey revealed that 12% of those with a medical condition would not always disclose it to a travel insurer, or travel uninsured.

From a consumer perspective, this makes searching for insurance difficult and distressing.

We have a large group of potentially vulnerable consumers who are facing difficulty navigating the insurance market in order to access products to lead a normal life.

The market

At the same time, we understand that insurance pricing can be complex. Insurers have to bring in a broad range of information and factors and weight their relative importance in order to determine the premium.

From an industry perspective, the high premiums for some consumers might be justified by the higher risk involved, the expected higher value of claims or a more costly and lengthy underwriting process.

But from a consumer perspective, consumers who are unaware of how insurers measure risk and determine premiums may feel aggrieved that their individual circumstances are not taken into account.

Equally, consumer organisations question whether insurers are really basing their decisions on sufficiently relevant statistics.

Specialist firms doing some really good work do exist, but research suggests that consumers struggle to navigate the market to even locate these specialists.

Often, consumers end up taking policies that have exclusions applied. Our Thematic Review of travel insurance[3] claims provided some indication that consumers do not always understand those exclusions.

We want to better understand the issues facing vulnerable consumers accessing different financial markets

Through our Call for Input[4], we want to better understand the issues facing vulnerable consumers accessing different financial markets, including exploration of whether more can be done to encourage innovation in this area.

To help us do this, in this Call for Input we are seeking to better understand the following areas:

• The market, and specifically in relation to third party tools (for example medical screening tools) and how consumers who have, or have had, cancer are treated by firms
• The consumers’ journey and the barriers they face;
• And finally, innovation and whether there is anything preventing the market from implementing innovative solutions.

The role of innovation

We have heard about innovative practices in the market; however we are aware there are also complex barriers that can prevent these innovations from being adopted in the mainstream.

In March this year we held an event on new technology in the insurance market – so called InsureTech - to discuss and learn about the developments in this market. This event included a panel on Access.

The event highlighted several examples of firms innovating in the interests of consumers.

Some specialist providers are developing alternative medical screening approaches that focus on more serious or complex conditions, and some are making significant changes in product design based on consumer feedback.

We have also seen a trend of digital automated broker services that could help consumers to better navigate the market.

Throughout much of the FCA’s work, we have demonstrated we believe innovation is a powerful tool and can really help to drive solutions for the benefits of consumers.

We are keen to understand the opportunities for firms in this area. Are there more options to meet the needs of a changing population and the possibility of creating a more user friendly and inclusive financial services?

Conclusion

Our Occasional Paper on Vulnerability[5] explained that financial services need to be able to adapt to the changing circumstances that life throws at people, rather than being designed for the perfect consumer who never experiences difficulty.

This Call for Input represents an opportunity for the industry, regulator and consumer groups to work together to produce meaningful change for an extremely vulnerable section of the consumer population.

Indeed, I hope the theme of collaboration will be central to our discussion today and I hope we can put some of the most important issues on the table.

But today is about more than just a conversation - it’s a call to action.

Detriment, as described in the paper, is being suffered now. As I said, by 2020, almost 1 in 2 of us will get cancer in our lifetime. Around half of those diagnosed with cancer today will live for at least 10 years after diagnosis.

Today’s event will set the agenda and future actions to bring people together and to drive solutions that ultimately benefit consumers. I know everyone is here today to be part of that.

Ultimately this is about the most vulnerable consumers in society who have as much right to access financial products that meet their needs as anyone else.