Retaining customers is set to become a much more important part of the insurance industry. Why? The rise of Pay As You Go, multi-product policies and consumer contact via smartphone or home-based net device such as Amazon Echo are all placing extra distance between the customer and the company. Decades ago people actually visited a shop, a High Street broker, to arrange insurance, or the `Man From the Pru‘ knocked on the door. That was replaced by the call centre in the 1990s.
In an age when people use a smartphone app to vary their cover, take out travel insurance within minutes for a weekend break, or submit a claim via their own customised dashboard, the way insurers deal with customers online is becoming more important than ever. In this piece Karen Wheeler, VP of Affinion Group in the UK, looks at the path ahead for the insurance sector and the benefits of building your own online ecosystem to interact with consumers more often.
How insurers are redefining their role in customers’ lives
It’s no secret that insurance companies struggle to keep customers loyal and engaged. It’s an industry blighted by low customer satisfaction scores; the Institute of Customer Service’s latest Customer Satisfaction Index revealed that, compared to sectors like banking and retail, insurance did not improve its satisfaction index score from the previous six months.
On top of this, research has revealed 27.9 per cent of respondents find the insurance sector the worst when it comes to customer service. So what are the obstacles in the way to customer loyalty – and could the creation of ecosystem be the answer to providers’ prayers?
Why insurers struggle to win customers over
The first challenge is insurance policies are often perceived as a boring, but necessary, part of everyday life that provide peace of mind, but are not exactly a choice that thrills the consumer.
Secondly, insurers are operating in a highly commoditised market, making it extremely difficult to differentiate. This is why consumers often make their decision purely based on price, and the proliferation of price comparison websites has done nothing to discourage this.
Lastly, there is a low-touch relationship between customers and their providers. Generally, a customer will only get in contact with their provider if they want to renew (or cancel) their policy, or when they need to make a claim. Aggregator websites also mean insurers are often one step removed from their customers, making it difficult to establish a direct relationship.
A new dawn for insurers
But change is on the horizon. According to Bain & Company’s global research Customer Behaviour and Loyalty in Insurance, insurers are working hard to change customers’ perceptions, by expanding their offerings to become a more important and valued part of their lives.
This is being achieved through placing themselves at the centre of an ‘ecosystem’; an interconnected network of services that includes non-insurance offerings such as smoke, intrusion and leakage monitors for home, health diagnostics and advice, and telematics sensors for vehicles that can be used to trigger maintenance alerts.
Crucially, these services are an extension of insurers’ core remits. They offer peace of mind, reassurance, protection and support to consumers in important areas of their lives. Bain’s view is that “no longer merely isolated providers of a low-touch product, insurers can become the key players in ecosystems of interconnected services for home, auto, health and life”.
The benefits of an ecosystem
Building an ecosystem helps providers to find a much-needed point of differentiation, and move from the provision of a specific service – such as house insurance – to a role in which they add value in multiple areas of the customers’ lives.
This expanded reach enables insurers to engage with their customers through more touchpoints, and creates more genuine and valuable opportunities to contact them and build an ongoing dialogue. Ultimately, this has the potential to make insurers a larger, and more, valuable part of their lives – increasing the chances of customers staying loyal.
The positive impact of extending in to new areas of customers’ lives is clear. Bain’s survey demonstrates that where insurers concentrate on building loyalty they can gain considerable ground – as much as 20 percentage points in Net Promoter Scores over a three-year period.
The missing piece of the puzzle
But amongst the areas already included within the ecosystem, there is a huge opportunity that is being missed. In today’s digital age, it’s crucial that this model expands to include cyber services that help customers to protect their online identities and privacy.
We manage our lives supported by multiple devices, and share more personal information than ever before across social media, e-commerce and the web, so the risk of sophisticated fraudsters taking advantage is never far away. Research reveals that more people believe it has become harder to stay safe online in the past five years (63%) than in the “real” world (52%).
The ecosystem should evolve beyond the traditional remit of insurers – the protection of tangible, physical possessions – to offer services which detect, and prevent against, the signs of suspicious online activity. For example, social media and dark web scanning, that can detect if the customer’s data has been shared or compromised in any way before it causes a serious issue.
And, if the worst was to happen, insurers should embrace their role as ‘protectors’ and support customers to resolve the issue. This could be achieved in a number of ways, for example, in the form of an ID/cyber helpline, legal assistance, a ‘clean up’ service that deletes or blocks compromised personal information, or even cyber fraud insurance, a topic that’s been high on the industry’s agenda for some years now.
This holistic support system, from detection to resolution, holds huge potential for insurers to become a more relevant and important part of their customers’ everyday lives – not just a number to call to complain, claim or renew a policy.
Time for change
The insurance industry has reached a pivotal point in its journey and providers are realising there is an untapped opportunity to diversify and offer services that address broader consumer needs. With customers quick to change providers if they find a cheaper option – or after a bad experience – it’s crucial that insurers find a positive point of difference from the crowd. Protecting them against the growing number of cyber threats may just be the answer.
Does the Internet of Things, apps, online portals and social media offer an opportunity for insurers to reach out to customers, and if so, what are the best strategies? Post a comment below.