Will 2018 be the Year of the Insurance Customer?
At the end of our previous post on the Internet of Things, we pointed to the all-importance of customer-centricity for the success of today's insurance products. This is because the 'disruption' to which incumbents are responding is customer-driven ... The extent to which insurers survive – and thrive – will depend on how well they can keep up with the ever-evolving needs of today’s consumers, needs that are increasingly being set outside of insurance, especially by retail and consumer electronics.
In this installment, we approach the topic of marketing and customer-centricity at insurance carriers by looking two principal measures: customer performance and customer priority. We finish with a look at customer loyalty, and how distribution affects the customer relationship.
- Customer performance: how well insurers believe they are meeting customer requirements; key measures are customer-centricity, 21st-century customer expectations and customer engagement
- Customer priority: the relative emphasis insurers are placing on the customer, in terms of money, time, staff and training resources
The following stats are based on the survey at the heart of our Global Trend Map; a breakdown of all respondents, and details of our methodology, are included in the full Trend Map, which you can download for free at any time.
"Listening to the 'voice of our customer' is traditionally not a strength of insurance companies. It’s almost as if customers are speaking a foreign language. Increasing competition and transparency together with changing expectations, especially of a younger generation, will force us to learn our customer´s language quickly."
Monika Schulze, Global Head of Marketing at Zurich Insurance
In our earlier post on insurer priorities (Insurance Trend Map #3: Insurer Priorities), we saw Customer-Centricity identified as a major priority by carriers worldwide. However, despite this high priority level, the general trend among carriers is of dissatisfaction with current customer performance, as we will now explore.
Measures of customer priority and measures of customer performance therefore stand in stark contrast to each another, and there is in fact nothing surprising in this; if carriers were already meeting their customer-centricity aims, then they certainly wouldn’t be focusing on it as such a problem ...
Some Measures of Customer Performance
Exhibit A: Only 45% of insurers and reinsurers believe their organisations are truly customer-centric …
While the above stat is an indictment of present levels of performance at carriers, it does indicate a strong will to change. It is better to admit that you have a problem than to falsely believe your customer relationship will take care of itself!
Different insurance lines produce similar scores on this measure, except for Life, which lags somewhat. The reason for this may well be the historic lack of touch-points in Life insurance, something we touch on again in our forthcoming feature on Claims (read ahead by downloading the full Trend Map straight away).
Exhibit B: As we see in the infographic below, only 20% of Insurers & Reinsurers believe they are meeting today’s high customer expectations.
We note that this proportion (20%) is lower than the 45% claiming to be customer-centric; this implies that, while a customer-centric approach is necessary for strong performance, it is by no means sufficient and that there are plenty of customer-centric carriers who are nonetheless falling short of expectations.
Exhibit C: 70% of insurers and reinsurers are unhappy with their level of customer engagement …
Insurance has, rightly or wrongly, always been an industry with infrequent customer touch-points. However, in today's always-on world, the possibilities for customer engagement are boundless. The widespread dissatisfaction with current levels of customer engagement, while obviously showing up shortcomings, bodes well for the future of the industry.
A Note on Customer Priority
We cannot discern any conclusive regional trends across our measures of customer performance; however, we can say tentatively that Europe and Asia-Pacific have a slight lead over North America as far as customer priority is concerned. This is based on interviews with local industry representatives, which we present later in our Regional Profiles (read ahead here), as well as the below stats from our earlier posts:
- Europe led our regions in its focus on Customer-Centricity (Europe’s score was 56/60, compared to North America’s 51), as tabulated in Insurance Nexus Global Trend Map #3: Insurer Priorities
- The Chief Customer Officer role was very important in Asia-Pacific but relatively insignificant in North America, as we saw in Insurance Nexus Global Trend Map #4: Services, Investments and Job Roles
At the beginning of this post, we pointed out that customer performance and customer priority stand in an inverse relationship to each other, and we hypothesised that prioritisation of the customer is driven by poor performance. If European and APAC carriers are indeed trying harder – albeit only marginally – to raise their customer game than their North American counterparts, then we might conclude that, for whatever reason, the customer relationship in the former two regions is more ‘problematic’ than in the latter. And what underlies this is, we believe, the nature of insurance distribution.
Customer Disruption = Distribution Disruption
Insurers worldwide are chasing consumers via new channels and with new products, and the fundamental reason they are having to do this is that emerging (digital) channels have given incumbents and newcomers alike access to their traditional client base. This customer access is the fundamental enabler of 'disruption': what was once a relatively captive market is now in flux.
"The consumer is used to a really personal experience now, and that is exactly the same as when they’re buying a pair of shoes online. They’re used to being able to get something if they want it, where they want it and at the cost they want, including complete information like the exact half hour it’s going to turn up in their house and what colour it is."
Charlotte Halkett, former General Manager of Communications at Insure The Box
The less stable traditional distribution channels are, the more (unwanted) competition insurers must deal with and the harder they must fight to boost customer performance; at the end of the day, ‘poor performance’ is really only poor performance relative to one's competition.
Off the back of this, we predict that channel disruption will be marginally greater in Europe and Asia-Pacific – who are prioritising the customer most forcefully – with traditional models remaining relatively more intact in North America. We will find out for sure when we review our stats on Distribution in our next post – or if you'd like to read ahead straight away, simply download the full Trend Map at any time.
"The insurance business hasn’t changed significantly over the last 100 years – however, in the last 10 years, the digitisation of sales and servicing has led to a significant shift towards customer-centricity. There are new and dynamic ways to sell, new market entrants and advanced ways to service customers who provide instant feedback."
Ash Shah, Regional CIO and Chief of Staff Property & Casualty at AXA Asia
While we have tentatively grouped Europe and Asia-Pacific together with respect to their ‘problematic’ customer relationship, which in any case we explore further in our next post (on Distribution), we should point out one very obvious respect in which this relationship varies greatly between them.
Europe is, like North America, a developed, relatively saturated market, where the retention and optimum conversion of existing customers is vital not just for growth but for survival. In Asia-Pacific on the other hand, carriers are not just concerned about keeping existing customers but also accessing, for the first time, millions of consumers new to insurance.
Considering this, it is still better on balance to group Europe and North America together, and their shared focus on existing customers is borne out in our stats on loyalty. Loyalty is certainly of high importance around the globe, as we see from our chart below, but we can reveal that North America and Europe lead Asia-Pacific on this measure.
In Asia-Pacific, loyalty and retention are certainly not unimportant; but, with lots of market share up for grabs (in particular from tapping the enormously populous emerging-market segments), too much focus on loyalty may result, down the line, in insurers finishing with a smaller slice of the pie.
"In an age of intense competition and high customer expectations, insurance carriers, brokers and agents have a significant battle ahead for the hearts, minds and wallets of customers."
Mariana Dumont, Head of New Projects at Insurance Nexus
In our next installment, on Distribution, we look at emerging digital, affiliate and aggregator channels, and assess carriers' efforts to provide a consistent customer experience across these channels. We will also be considering the variant distribution landscapes in different major markets around the world, as well as the impacts that this has on carrier-customer relationships. Feel free to skip further ahead as well, by downloading the full Trend Map (it's 100% free!).
For any inquiries relating to the Insurance Nexus Global Trend Map, this on-going content series or next year's edition, please contact:
Alexander Cherry, Head of Research & Content at Insurance Nexus (email@example.com)