GUEST COLUMNIST – LIZ ZHU
Caring about customers is a business imperative as well as an ethical one for insurers, argues Liz Zhu, a Medical Officer at Southern Cross Health Society.
“We have an unfair advantage – we care!” proclaim the giant red letters splashed across the wall at my gym. The slogan is also prominently displayed on staff uniforms.
This has got me thinking. Are businesses obligated to go beyond providing contractual service and care? And does transcending traditional contractual obligations translate to strategic advantage in business?
Insurance is fundamentally about risk and responsibility sharing among large groups. Of course, even when adhering strictly to contractual obligations, insurance almost always creates positive social dividends by selling a core product that has intrinsic social value.
For decades post-World War II, this focus created businesses that produced much-needed goods and services, and powered economic growth around the world. Insurers’ ethical duties to customers were to fulfil their obligations in utmost good faith, and make decisions with integrity, fairness, transparency, and honesty.
Shouldn’t insurers be interested in preventing catastrophic developments…
Under this framework, explicit efforts to address social challenges or ‘care’ for customers, communities and society were left to governments and not-for-profits. Yet, most catastrophic events do not exist in vacuums – the losses connected to these events are due to layers of unsound decisions, ethically questionable managerial practices, and systemic policies with perverse incentives.
The Mount Erebus disaster, the Deepwater Horizon oil spill, and Hurricane Katrina were not black swans but white swans – events that would eventually take place given the unmitigated risks in the system.
In strictly adhering to contractual obligations, insurers, their customers and the public suffered significant losses. Shouldn’t insurers be interested in preventing catastrophic developments, which benefits not only society but also the insurance industry and our customers?
Using the core business to create positive societal impact also offers scale advantages and business benefits. Recently, more corporate leaders are reshaping the role of business in the societal fabric to reap these opportunities. Customers and employees are pressuring companies to play a role in addressing critical societal challenges, such as environmental protection and diversity and inclusion.
Shareholders are increasingly focused on the social practices of businesses. Governments expect businesses to do more to solve problems and look to collaborate with the private sector on initiatives. Businesses that focus on societal impact experience more reliable growth paths, reduced risk of negative, even cataclysmic events, and increased longevity. In short, these businesses do better.
Shareholders are increasingly focused on the social practices of businesses…
My employer, Southern Cross Health Society, is a case in point. Early in the Covid-19 pandemic, we began offering cover for video and phone health consultations for members and worked with hospitals and providers to decrease demand on the public health system.
We extended prior approvals to allow our members to access care when risk of the virus was lower and when the health system was ready. We expanded our financial hardship options to allow eligible members the ability to put their policy on hold for a specified period or to downgrade their policy.
Our staff, who were fully supported and enabled to work remotely, called and checked on vulnerable members and customers. We returned $50 million through premium credits to financially support our policyholders and business customers. We continued our evolution from health insurer to health assurer through the development of outcome-based health care, measurement of clinical outcomes, and partnerships with preventative and primary care groups. We froze the salaries of all staff and board members’ fees for 12 months.
…caring about customers is not only an ethical imperative, but also a business imperative for insurers today…
Despite the climate of great uncertainty, we felt our response was not only the nice thing to do, but the right thing to do. Our focus remained firmly on the best interests of our members, business customers and wider society.
In FY20 we gained more than 8,000 new members, attained an employee engagement score of 81 per cent, and a Net Promoter Score of 59.5 per cent. These results, complemented by a $32.4 million surplus, are testament to the power of maximising total societal impact.
Doing more and caring about customers is not only an ethical imperative, but also a business imperative for insurers today. The traditional practice of calculating the financial impact of damage without taking appropriate measures is not good for ourselves, nor for society at large. Insurance has the power to drive behaviour towards risk management and sound ethical conduct, which reduces risk of significant losses.
Additionally, acting to maximise total societal impact creates internal and external opportunities for businesses to succeed. It opens new markets, spurs innovation, mitigates risk, strengthens branding, attracts and retains talent, and becomes an integral part of the societal fabric.
Seizing the opportunity to drive societal impact increases the likelihood that the business, and the insurance industry, will grow and thrive over the long term. Caring is a significant advantage.
The views expressed are Liz Zhu’s.