Insurers Under Fire - 5 Things We Learned From The Liverpool Car Park Inferno

Just when we thought the page could be turned on a challenging 2017, over 1,300 vehicles were destroyed in a blaze in a Liverpool car park on New Years’ Eve.

While no one was harmed, the impact on consumers was severe, and not for the first time insurers found themselves on the receiving end of public anger. Again, the gap between expectations and reality was exposed, as our consumer survey found, with attitudes splitting almost down the middle on a range of issues — including whether premiums would rise as a result, or whether insurers should have done more to help. 

Here’s five things the data told us.

1. The industry remains a media punchbag — and must go on the front foot

The tabloids in particular make a hobby of trashing insurers for not paying claims, usually with little consideration of whether the policyholder was covered in the first place. This puts the industry in an impossible position: either suffer trust and brand damage (increasingly important in the digital age) or make exceptions that could create dangerous precedent or undermine existing customers that have (and pay for) the cover that entirely meets their expectations. If, as in this case, insurers make exceptions that benefit their customers, they are automatically branded as U-Turns, which implies some kind of fault.

While this challenge can’t easily be solved — and arguably not by the industry alone — what is more addressable is how the industry allows itself, at times, to be perceived. The question needs to be raised as to why there isn’t a process in place for a more unified response to such marginal (yet significant) events in order to mitigate reputational damage.

In this case, our survey found that 79% of consumers were aware of the fire, and 17% of them were also aware of insurers waiving excesses and retaining no claims bonuses (NCBs) and premiums at renewal. This represents a substantial opportunity to generate positive reputational value; the challenge is a higher number would have only seen the headlines and tweets that said their insurer was ripping consumers off.

As our CEO Ian Hughes says:

“What could insurers learn from this sort of mass claim scenario? It feels like an unnecessary own goal was scored here — but I also wonder whether the voice of ‘happy customers’ was squashed by what is a better bad news story.”

The industry has to go on the offensive otherwise precious wins, where insurers not only deliver on their promise, but also on their consumers’ expectations, will continue to turn into losses. A year ago, when President Trump barred entry to the US for citizens from a group of Middle Eastern states, one big insurer took the lead (and others followed), saying they would pay any claims made on their travel policies for disruption. The exposure wasn’t significant, but the reputational impact was — and the press responded in kind.

2. Consumers still don’t understand what they’re buying

Few surprises here, but an alarming number of consumers remain unfamiliar with their policy, or how it works in practice. This doesn’t help anyone, especially in their time of need. For example, while 48% of consumers expect their NCB to be impacted by such an event, and 43% their premium, we found a significant number do not, regardless of circumstance. 

Unfortunately the latter group are more often the kind who take to social media to express their outrage. Until this gap between expectation and reality can be bridged, this will remain an endemic industry issue.

3. We need to get rid of the jargon — It’s a customer service scourge

Aside from the obvious financial fallout, a focal point of consumer rage was the implication of liability, or fault, for the fire. While insurers maintain this was effectively semantics (as a claim needs to be made against something), in a time of vulnerability clearly it felt too much like an accusation. The situation was compounded by its timing, but insurers responded with admirable speed.

Nonetheless, a misplaced word can do untold damage, and as part of the ongoing quest to make policies clearer —and ultimately understood — perhaps all customer-facing language, in particular claims, needs to be revisited, too. Otherwise the search for “who’s to blame?” will remain a divisive part of the experience — and consumers and insurers alike will suffer.

4. Social media is changing consumer power

We all know by now that social media has completely changed the concept of community, and public domain. Brands naturally prefer their complaints to be taken offline. The case of the Liverpool fire, while providing a useful avenue for consumers to remain updated on the industry response, also illustrated the opportunity to leverage their combined power.

“In the last 5-10 years there has been a change in how consumers react where groups of them are impacted, such as natural disasters and terror attacks. The tragic events at Grenfell Tower last year and now more recently the fire in Liverpool are good examples of this,” Martin Milliner, Director of Claims at LV= explains.

“They have different expectations of how such events should be responded to, and this ‘community response’ is driven primarily by social media. Insurers, therefore, have to respond differently. In the case of LV=, when it came to dealing with the claims, we took a very pragmatic view and asked ourselves the question: “How would a customer want to be treated at a time like this?”

As well as waiving excesses up to £700 and retaining no claims bonuses, LV= also provided complimentary hire cars to their policyholders, even for those who weren’t covered as part of their policy.

“It was very clear from the media reports that it was an exceptionally severe fire and, therefore, the normal approach to assessing vehicle damage would just not be possible. As a result, we provided customers with a ‘blind’ evaluation and within 48 hours we’d settled almost 80% of claims.”

5. When a claim is not a claim

Judging from the volume of Tweets on the three core consumer irritants — paying excesses, losing NCBs and premiums going up a result — it was the impact on NCBs that generated the most concerted rage. However, as industry veteran and former FCA actuary, Brian Gedalla, said simply on LinkedIn:

“It's a claim and so NCB is impacted.”

While slim majority of motorists appear to understand that reality, an even slimmer majority said they would expect insurers to make exceptions in this case.

"Surely the car owners have a right of action against the building owner under their public liability,” Gedalla adds, “and should be able to make full recovery from the building's insurer, thus protecting the NCB.”

Regardless, insurers made their move to protect NCBs and in many cases to fix premiums at renewal. Some commentators point out, however, that even with a fully recovered record, some pricing models could still penalise the policyholder by loading the premium before NCB is applied.

As a result, this issue may linger long after the flames have been extinguished. Insurers must tread very carefully, and with purpose in the months ahead.

What do you think about the consumer and industry response to the Liverpool fire? What can the industry can do to manage the expectation gap with its customers? Let us know in the comments below, or join the conversation on LinkedIn and Twitter.

Due to the unusual nature of the #LiverpoolFire, Aviva customers’ NCD will not be affected, there's no excess & premiums will not go up due to this incident. So far 121 claims have been made by Aviva customers. We've settled & paid a number of these, with further payments ongoing

— Aviva UK Support (@AvivaUKSupport) January 5, 2018

Due to the exceptional circumstances of the #Liverpoolfire, those affected do not need to pay their excess, NCD will remain intact and the claim won't affect their premium at renewal ^Sophie

— Direct Line (@DirectLine_UK) January 7, 2018