Society

How to rebuild trust in Kenya insurance sector

insurance
scottbellows

Summary

  • Once an organisation violates a stakeholder’s trust, a wide array of remedies has been researched to ascertain if the techniques actually rebuild trust.
  • Unfortunately, insurers tend to stick their heads in the sand and providing no response at all.
  • Such a strategy goes against organisational and consumer behaviour and psychology research.

PART 4

Today marks the fourth and final article in the ‘Trust in the Insurance Sector’ mini-series.

The first three weeks analysed consumer trust perceptions across the ability, benevolence, and integrity of the industry.

PART 1: Insurance trust issues in Kenya

PART 2: Dwindling trust to hit insurance penetration

PART 3: Why many Kenya insurers fail the test of integrity

Given the steep 32 percent decline in insurance coverage between 2013 and 2019 and the abysmal state of faith and confidence in insurers leading to likely further softening of demand, let us delve into how to rebuild trust in the sector.

Once an organisation violates a stakeholder’s trust, a wide array of remedies has been researched to ascertain if the techniques actually rebuild trust.

Techniques studied include apologising for the transgression, denying the company did anything wrong, coming up with mountains of excuses, promising to improve, paying reparations, posting a bond against future bad behaviour, showing self-punishment as sorrow for mistakes, and not responding at all.

Unfortunately, insurers tend to stick their heads in the sand and providing no response at all. Such a strategy goes against organisational and consumer behaviour and psychology research.

A widely respected prolific study by Donald Ferrin, Peter Kim, Cecily Cooper, and Kurt Dirks shows that a firm’s reticence to respond usually, if not always, proves suboptimal as compared to other options of dealing with crises and failures.

Dozens of other studies, including by Gaurav Bansal and Fatemeh Zahedi, find similar results in different scenarios and industries.

Researchers Graham Dietz and Nicole Gillespie specifically developed a process for rebuilding damaged trust following an organisation-level failure.

A company can achieve a failure depending on magnitude with systemic entity-wide issues being hypothetical or actual. A pre-injury product recall or a faulty insurance policy feature alteration before customers are impacted both represent hypothetical failures.

A loss of life due to an erroneously cut off benefits, loss of investor funds due to a lawsuit over bad business practices, or an investigation by the regulator resulting in a mass refund of consumer premiums would all equal a real actual failure.

Graham Dietz and Nicole Gillespie’s prestigious study boils down organisation-level failures into the following eight categories: accounting frauds, deceit, incompetence, fatal avoidable accidents, exploitation of vulnerable people, massive compulsory job losses, bankruptcies, and catastrophic collapses in organisational finances.

Many insurers here in Kenya suffer clearly from two failure categories and potentially another two probable categories.

As discussed in last week’s Business Talk, the insurance industry’s record on making contractual documents difficult to obtain as well as delays and barriers to payout of benefits, would fail other countries’ regulator requirements but are tolerated here in Kenya, all qualify as the organisation-level failure category of deceit.

In the first week of the four-part insurance mini series, insurance sector incompetence was delineated.

These two are the clear orgainsation-level failures espoused by many insurers.

Then potential arguable third and fourth categories include fatal avoidable accidents as health insurers delay pre-authorisation and bait and switch over new chronic conditions versus pre-existing illnesses, as discussed last week, can cause consumers to miss crucial medical care that could have saved lives.

Then exploitation of vulnerable people could potentially be argued for the insurance sector in some limited instances as consumers hold the power pre-purchase with insurers, but once a policy is bought and then a vehicle accident, property theft, or health accident or illness occurs, those same consumers lose bargaining power and lay at the mercy of insurers to honour their commitments but often get denied and taken in circles.

After a major health claim for a heart attack or cancer, as examples, then no new insurer will likely underwrite the consumer and cause them to cling to their original insurer for renewal even if claims are being erroneously rejected.

Research shows a very clear process to move forward and rebuild stakeholder trust following an organisation-level failure. The framework follows a four-step process with each stage containing two parts.

First, a company must verbally acknowledge an incident followed by an expression of deep regret while announcing a full investigation and commit resources to prevent a reoccurrence.

Second, the firm must conduct a diagnosis of the issue or condition that is perceived to be accurate and is actually accurate, systemic, and multilevel. The diagnosis should be timely and fully transparent.

Third, the organisation needs to act on reforming interventions by verbally apologising depending on culpability and make reparations as appropriate.

Then the action to accompany the verbal statement in this stage would be to fully implement the reforms that are derived from the diagnosis with prioritisation of solution mechanisms according to failure type.

Finally, the entity must conduct a post-intervention evaluation to gauge whether the failure has indeed been remedied. The evaluation must be accurate, systemic, multilevel, timely, and transparent.

Then, insurer’s marketing teams can adapt and use established customer surveys originally developed by social scientists Kazuya Nakayachi and Motoki Watabe to determine the effectiveness of their trust repair campaigns.

The scientists’ survey covers prior consumer attitudes towards the company, trustworthiness perceptions about the firm’s ability, benevolence, and integrity, then expectations for future failures at the firm, how closely will the stakeholder be on the lookout for and fear future transgressions by the company, motivations regarding the organisation, and lastly intentions to purchase from the company in the future.

In short, take a scientific approach to repairing the dreary trust levels apparent in the insurance sector.

Do not proclaim that a shrinkage in coverage is due to whatever excuses one can find in boardrooms that blame consumers for not understanding or not being reached.

Overcome pro-self-bias and look in the mirror to understand why customers flee your products.

Hold scientifically rigorous focus groups and surveys of insured consumers that listen bottom-up instead of trying to force a customer to agree with you in unscientific push polls often conducted in the sector.

[email protected] or @ScottProfessor