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Demands and needs

In the sales stage of the customer journey lifecycle we spoke about the sales process and touched upon the importance of matching a customer with a product that meets their demands and needs. Understanding these needs allows you to provide a product intended for them, as determined by a carrier’s target market statements.

Since the introduction of the Insurance Distribution Directive in October 2018, firms selling insurance products have been required to assess their clients demands and needs, and only present products that are compatible with those needs.

If a customer does not obtain a product which meets those needs, they will not be obtaining fair value or a good outcome. As a customer potentially doesn’t have cover fit for purpose, they may have claims declined, the customer may feel their policy was mis-sold and therefore could lodge a complaint. This, could result in negative publicity and making it more difficult to attract new customers. This highlights the importance of ensuring you find products that meet a customer’s demands and needs.

To match our customers with products which meet their needs, a fact find must be undertaken, examples of the type of information that should obtain from the customer are:

  • Understand why the customer wants the product
  • The risks they are looking to cover
  • The level of cover they require
  • Factors which may impact the performance of the cover
  • Understand how key limitations may affect the customer
  • Their budget

This is not a comprehensive list and the level of information required will vary depending on the complexity of the product.

Once the demands and needs assessment has been completed, you must:

  • Record the demands and needs and specify those to the customer before the conclusion of the contract. This will allow the customer to confirm what’s been recorded is correct.
  • Only offer products consistent with those demands and needs – you should not propose products inconsistent with the customer’s needs.
  • If add-ons are offered, ensure these are also consistent with the needs of the customer.

Offering a product inconsistent with the customer’s demands and needs

As outlined earlier, failure to offer products consistent with a customer’s demands and needs is very likely to result in a complaint and may result in the following:

  • A complaint lodged with the Financial Ombudsman Service (FOS) initiating a protracted dispute which may result in a financial penalty if the FOS finds in the customer’s favour;
  • The paid premiums may need to be refunded;
  • Brand damage through negative publicity, which may impact public perception and how appealing you are as a business;
  • Be subject to regulatory action.

Questions to ask

  • Have I provided information on products which meet the demands and needs of the customer?
  • When offering an add-on, is this compatible with the demands and needs of the customer?
  • Do I believe we've conducted a thorough demands and needs assessment?

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