Power to the Consumer

It is no secret that insurance customer behaviour and expectations are in the midst of profound change. From the ability to research and purchase products online, to the ease of speaking out via social media, consumers not only have a voice, they have power.

Combine that with challenging economic and market conditions, continuing weak investment returns and expanding regulatory supervision and one thing is clear: insurers need to refocus their efforts to sustain a competitive advantage and position themselves for growth.

Ernst & Young’s Canada 2013 property-casualty insurance outlook notes that developing new products and strategies specifically designed to better fulfill consumer expectations will play a key role in maintaining and enhancing profitability in 2013 and beyond.

Lucky for insurers, they have access to a rapidly expanding volume of data from transactions, claims histories, social media interactions, Internet searches and GPS-type devices. While a host of challenges exist when it comes to deriving meaningful, insightful information from that data, those insurers that integrate and leverage the information through product development, pricing, sales and claims can improve underwriting capabilities, customer service and even the claims experience, giving consumers the power they are demanding.

MYTH BUSTER

Ernst & Young’s Global Insurance Consumer Survey 2012 looked at insurance consumer behaviour and preferences in Canada, and around the world. The company surveyed 24,000 insurance customers globally, including 1,000 Canadians, to better understand what customers want from their insurers. Many of the findings bust some popular myths that abound in the industry.

For one, while technology is of utmost importance, the future is not all about being online. The survey found only 32% of Canadian respondents used the Internet to research insurance and only 7% had actually bought insurance online.

While those numbers are low, insurers need to think about integrating both online and offline channels to meet their customers’ expectations in the future. Most still currently prefer to buy insurance through more traditional channels, but 31% of respondents indicated they will use an insurance quote comparison website in the future.

While online is an important part of the future, it is just one component of an integrated channel management capability that is critical to growth. Insurers need to carefully gauge how current and prospective customers prefer to purchase insurance, and then invest in those channels. Those that determine a more direct sales channel is most appropriate might choose to develop that channel through a more robust online presence, or even consider broker acquisitions.

In any case, customers will continue to look to the Internet and other technology-enabled systems to enhance their insurance service experience, and insurers need to catch up. Many insurers are using out-of-date systems that cannot effectively support online and mobile integration. Investing in new or improved systems can make a big difference when it comes to seamlessly integrating the overall customer experience. Upgraded systems that can make better use of data will also be an advantage when it comes to cross-selling and retention.

Insurers need to realize the old wisdom that customers do not enjoy the sales process and resent insurers trying to sell them additional products simply is not true. In fact, the survey found that, if insurers understand customers’ needs and offer the right proposition in the right way, they can cross-sell, upsell and repeat sell effectively.

Despite these preferences, most insurance companies fail to take advantage of opportunities to market additional policies to clients, apart from auto and home. To cross-sell effectively, insurers need to ask how they can demonstrate that another purchase from the same provider is either easier or a better value than going to another insurer. Online channels, for their part, should offer easy-to-understand, unbundled products with clear up-sell options, enabling customers to build into the product the value that meets their specific needs.

In addition, by developing valuable loyalty or points programs, insurers can make these extra purchases even more attractive. Soon, reward programs will be more than just nice-to-have; consumers will expect them.

BEYOND PRICE

Tied to that, another notable survey finding was that buying insurance is not all about price. Make no mistake, price is critical, but other factors, such as brand and service, are increasing in importance as prices converge. Harnessing new technologies like vehicle telematics, for example, can provide real-time data delivery.

And this idea extends beyond simply gathering relevant market data. Think about the possibility of identifying an accident the moment it occurs, and being able to start the claims process immediately.

Similar opportunities exist when it comes to homeowners’ insurance, too. Sophisticated video monitors and intelligent security systems might transmit real-time data that insurers can, in turn, respond to in real time, providing a powerful customer experience.

Ultimately, consumers want control, predictability and service – and finding ways to give them those things will be critical to retaining them. While data management and analytics have been a fundamental element of insurance operations for decades, a new era of big data means insurers can fine tune that analysis to gain even deeper insight into customer behaviour and better offer products and service to meet their needs at the right time, and in the right place.

New technologies also provide myriad opportunities for insuring new and emerging risks. Cyber liability, for example, is an important emerging exposure area. And with the recent explosion of mobile and cloud computing, the fear of corporate and public data breaches is more real than ever before.

While possibilities for insuring new risks are easy to find – and often present a seemingly straightforward opportunity to gain significant market share and profits – insurers need to overcome a lack of historical data that would help to model price, coverage and underwriting.

A number of mergers and acquisitions have been seen in the Canadian p&c industry as of late, and for good reason. These types of deals can provide access to underwriting and loss data for different products and markets, and growth via new distribution networks and expanded geographies – all leading to more targeted and relevant customer experiences.

Of course, growing in this way is not without risk. Merging different company cultures and systems can be challenging, and while access to historical information might seem easy, problems with integrating different systems can make that data irrelevant.

Finally, insurers need to use the personal information entrusted to them by their customers with the utmost prudence. While most people are willing to share personal data in exchange for a benefit, insurers take on risk upon accepting that data. Putting in place data security systems is not an option, but rather a necessity to safeguard the trust of the customer.

While it is clear that rapid advances in technology can provide many opportunities, customer service remains a key competitive advantage and insurers need to allocate adequate resources to meet these rising demand expectations – or risk being left behind as customers seek alternatives.