By George Nicolaides, Founder and Chief Executive Officer of Gan Direct
In every mature market, there comes a point where competition is no longer driven solely by price or by the product itself. Beyond that point, the real competitive advantage becomes trust. The insurance industry is no exception.
For many years, the conversation revolved around premiums, policy coverage and exclusions. Today, however, customers evaluate something much broader. They want to know whether the company they choose operates transparently, communicates honestly, presents policy terms in a way they can understand and, above all, will stand by them when they need it most.
This explains why European legislation is no longer limited to setting operational rules for insurance companies. Over recent years, we have witnessed a consistent effort to strengthen transparency at every stage of the customer journey. The requirement for clearer pre-contractual information, the introduction of Product Information Documents (PIDs), the use of simpler language, and the ongoing discussions around Open Insurance all serve a common objective: enabling customers to make better-informed decisions.
Within this broader context sits the debate surrounding commissions. It is a topic that often generates strong reactions, perhaps because it is mistakenly framed as a conflict between insurance companies, intermediaries and consumers. In my view, this is an oversimplification.
A commission is remuneration for a professional service. As in countless other professions, insurance professionals should be fairly compensated for the expertise, advice and service they provide. The real issue is not whether commissions exist. The real issue is whether customers understand the overall transaction and feel confident that the recommendation they receive is genuinely in their best interests.
It is no coincidence that several European countries have chosen to go beyond the minimum requirements of the Insurance Distribution Directive (IDD). Markets such as the Netherlands, Sweden and Slovakia have introduced stricter rules on the disclosure of intermediary remuneration, while some have adopted even more interventionist approaches for certain categories of insurance products. Each country has followed its own path, yet they are all moving in the same direction: towards greater transparency and better-informed consumers.
Cyprus has adopted the model of minimum harmonisation with the European Directive. This does not mean that our market is lagging behind or that rushed regulatory changes are necessary. It does, however, mean that we must closely monitor developments and continuously ask ourselves how consumers’ expectations are evolving.
After all, trust is not built through legislation alone.
The law can establish a minimum level of consumer protection, but it cannot, by itself, create trusted relationships. Those are built every day through the way businesses behave, the quality of their service, honest communication and consistent delivery on their promises.
I believe that in the years ahead, insurance companies will not differentiate themselves solely through the products they offer. They will differentiate themselves through the way they explain those products. Through their ability to simplify what is often a complex process. Through how easily customers can understand what they are buying—and why they are buying it.
The greatest challenge facing our industry is not to create more insurance products. It is to build greater trust.
And in my view, that may well become the most important competitive advantage an insurance company can possess in the years ahead.
Also read: The customer is becoming the most powerful player in the insurance market
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