Distribution Strategies in Insurance Understanding the Customer View DISTRIBUTION STRATEGIES IN INSURANCE Executive Insurers are, by their very nature, cautious. As a result, they will often focus more on the risks of summary new developments as much as the potential opportunities. The evolution of the insurance as likely to use instant messaging or sales process however, and the web chats as they are face-to-face widespread adoption of digital meetings (5%) when communicating channels in every walk of life, has with their insurer. made insurers sit up and take note. Most now realise that they must The survey cautions against making interact with their customers – at simplistic assumptions, however. least to some extent – whenever, Respondents most comfortable with however and through whichever technology were not the youngest channel their customer desires. We group, as you might expect, but have commissioned this research those aged 35-44. In fact, surprisingly, to better understand consumers’ the youngest respondents were most expectations and gauge how well likely to interact face-to-face than any insurers currently measure up. other age group. The survey, based on the responses A key aspect of the findings is clear: of more than 2,000 working age insurers need both compelling adults in the UK, highlights that traditional and digital channels. It consumers are becoming more savvy is on the latter, however, that they when purchasing their insurance. seem most at risk of falling short. The For example, consumers are almost research found that more than one in as likely to prioritise the ease of three consumers find buying or obtaining a quote (36%) as much as renewing a policy online “very the brand of the insurer (42%). While confusing”. uptake is still modest, they are also We surveyed 2,000 working age adults in the UK 36% 42% 5% 35-44 Years old > Of consumers prioritise > Of consumers prioritise > Of consumers use > Age range of respondents the ease of obtaining a the brand of the insurer. face-to-face meetings most comfortable with quote. when communicating technology. with their insurer. 2 www.targetgroup.com Four out of ten (40%) 4 tech-savvy 35-44 year 10 olds claim that they find insurers’ online efforts confusing. Most worryingly for insurers, those half of respondents ranked online consumers that are most likely to marketplaces like Amazon very As such, if the industry prefer digital channels are also the highly for ease of use, concluding doesn’t take action now segment most likely to agree that that insurers don’t measure up. Only insurers don’t measure up. Four out energy providers’ online offerings to ensure their solutions of ten (40%) tech-savvy 35-44 year ranked lower. measure up, this survey olds claim that they find insurers’ suggests that insurers online efforts confusing. Others are currently left to set the bar when it comes to consumers’ could find that buyers are Consumers are comparing their expectations, which only look likely increasingly prepared to buying journeys against their other to grow. look elsewhere. purchasing experiences –more than 3 DISTRIBUTION STRATEGIES IN INSURANCE Consumer habits are changing To take just one statistic, 1% of the entire world’s population – 74.5 million people – bought an iPhone in the last quarter of 2014, helping Apple to achieve the most profitable quarter in corporate history1. > Sales in China alone were up by 70%. 70% Whilst increasingly sophisticated Ultimately, of course, it is the end technology is now ubiquitous in an One recent survey showed users’ opinions that count. As such, increasing number of countries, that 70% of insurance we have turned its attention to this studies have shown that insurers’ group in this latest survey. The responses to this challenge are, CEOs see technological research has taken a detailed look at best, mixed2. A reluctance to change and shifting at insurers’ distribution strategies innovate is a key criticism levelled Frconsumerom tackling fraud and behaviour automating as and whether they are meeting 3 underwriting information gathering, unparalleled insight into insurance by those inside the industry , both to modelling risks and claims buyers. Properly harnescustomers’sed, this can expectations. in terms of product design and, prkeyevention, threats big data has topotential growth drive de– avelopment of a truly to profoundly impact the insurance customer-centric organisation. crucially, in distribution. industrgreatery. According proportion to Karen than in This, at least, is the aim of the Morris, president of the Insurance marketing pr5ofessionals in our Innovationalmost Institute any in the other US, it is industry . Innovation is not “a natural part of survey. Three quarters (74%) expect big data to drive marketing 4 “pAddressingotentially the most it, however, is the insurance industry” , according decision-making over the next 5-10 to one former chair of Airmic, the signifianothercant digital-era issue. association for risk and insurance management professionals, and insurers themselves recognise the challenge. 1Apple posts the biggest quarterly profit in history, BBC News, 28 January 2015 http://www.bbc.co.uk/news/business-31012410 2See Target’s previous white paper, The 4 Ds of Insurance, for example, http://www.targetgroup.com/pdf/Target-Group-Four-Ds-of-Insurance-whitepaper.pdf 3“Lack of innovation is the biggest complaint that risk managers have about the insurance industry, according to the latest annual poll of Airmic members.” http:// www.airmic.com/about/press-releases/innovation-claims-and-compliance-top-risk-manager-insurance-concerns 4 www.targetgroup.com The research we commissioned explores four key areas: Interaction Clarity Looking at how consumers When it comes to getting the research, buy and check details information they need. of their insurance policies. Communication Competition Examining the ways they prefer to To discover how insurers communicate with their insurers. measure up against other organisations. From tackling fraud and automating underwriting information gathering, unparalleled insight into insurance to modelling risks and claims buyers. Properly harnessed, this can prevention, big data has potential drive development of a truly to profoundly impact the insurance customer-centric organisation. industry. According to Karen This, at least, is the aim of the Morris, president of the Insurance marketing professionals in our Innovation Institute in the US, it is survey. Three quarters (74%) “potentially the most expect big data to drive marketing decision-making over the next 5-10 significant digital-era 4“Data and understanding client needs are key to innovation”, Commercial Risk Europe, 16 June 2014 http://www.commercialriskeurope.com/cre/3335/63/ Data-and-understanding-client-needs-are-key-to-innovation/ 518th Annual Global CEO Survey, Key findings in the insurance sector, PwC, February 2015 http://www.pwc.com/gx/en/ceo-survey/2015/industry/assets/ceo-survey-2015-indepth-analysis-insurance.pdf 5 DISTRIBUTION STRATEGIES IN INSURANCE The rule of 3 Price, Product, and Brand. What insurers are selling still matters, regardless of how they are selling it. 80% 60% 42% > Of respondents naming > See product features as > Specified the brand price amongst the most the next most important of the insurer as key. 36% 31% important of factors. factor. What are the most important factors enough to consistently retain > In addition, when for consumers when considering a customers6. Capgemini’s study of deciding what’s important new insurance company, policy or insurers found that nearly 70% of to consumers buying renewal? Not surprisingly, price was customers would consider switching insurance, convenience key, with 80% of respondents naming provider – mostly as a result of poor is almost as important as it amongst the most important customer satisfaction, with less than brand, with 36% stating factors. This was true across ages and a third globally saying they had a the ease of obtaining a genders, but was particularly so for positive experience with their insurer7. quote and 31% rating both younger (18 to 24-year-olds) the ability to speak to and older buyers (55 or over), One positive finding for insurers someone easily. according to 84% and 85% of from Capgemini’s survey was that respondents, respectively. Product acquisition expense ratios (a measure features (60%) were seen as the next of commissions and fees against most important factor, and the brand gross written premiums that reflects of the insurer third, with 42% the effectiveness of distribution specifying it as key. channels) has improved. This, it noted, was likely to be partly down to Technological change suggests that increased use of lower-cost mobile there is little chance of consumers and internet channels8. Digital becoming less demanding when it channels can also help firms to deliver comes to convenience. By comparison, better customer service – and thus there is evidence that brand loyalty is bolster the strength of the brand. in decline, or at least not strong 6 “Customer loyalty seems to be decreasing – the number of survey respondents that said they switched their insurers at least once in the past two years increased from 32.6 percent in 2012 to 36.9 percent in 2013.” Digital reinvention: Trust, transparency and technology in the insurance world of tomorrow, IBM Global Business Services, January 2014, http://www-935.ibm.com/services/multimedia/reinvention_digitale.pdf 6 www.targetgroup.com Interaction Something old, mostly new. When it comes to researching, buying or checking policies, our research confirms that consumers overwhelmingly want to do it online. 85% > Of respondents prefer to use the web for these activities. Newspapers were mentioned by just consumers, with the breakdown 1% a handful of respondents – less than favouring tablets (8% compared with Newspapers 1%. The landline phone however, 4%). A notable discovery was that the continues to be significant, and used combined traffic from smartphones by 8%. These findings were broadly and tablets is already greater than consistent across genders, but, from traditional landline phones.