The insurance sector has historically been made up of a few, very large, companies that controlled a sizeable share of the market. Back in 2014 – five general insurance brokers controlled nearly 75 percent of the market (Statistica, 2014). The insurance sector is also one of the oldest and most traditional and because of that, one of the slowest to change.
However, in the last five years, the emergence of new insurtechs and digital players like Lemonade has begun to drive genuine industry change. The expectations being set by these digital-first insurers are changing the priorities of consumers. Based on an independent survey of UK consumers by FintechOS experience is only second behind the price in the order of consumer priorities, with 15 percent of consumers stating they would switch providers in pursuit of a better customer experience, and this rises to 19 percent for younger generations.
So how are traditional insurers doing when it comes to the customer experience (CX)? According to 73 percent of UK consumers, the CX in insurance has “stood still” for five years. Where other sectors have automated and streamlined insurance hasn’t. We want to know the weather forecast, we ask Alexa, job done. We want to eat dinner, tap a button and a Deliveroo will shortly arrive. But if we want to get a quote on life insurance, we end up signing up for a life sentence of forms - and therein lies the problem. As our attention spans have reduced, our expectations for a simple user-friendly experience have grown – and insurance companies simply haven’t reacted.
Then there’s Covid-19 which has accelerated the problem. The pandemic has heightened the importance of customer experience in a world that is remote and digital-first. Despite this, a staggering 79 percent of consumers believe their insurance CX has remained the same during the pandemic. The overwhelming majority of consumers did however state that they were sympathetic to services taking time to improve because of Covid-19, but while customers are understanding, that doesn’t mean they won’t leave. 62 percent of Gen Z (18–24-year-olds) respondents said that the pandemic has made them more likely to switch providers.
So, what can insurers do?
Commodification, crises, and the customer experience
Focusing on customer experience will not just help insurers retain business, it can also help them attract it. The fundamental challenge insurers face is that they operate in a highly commoditized market, where consumers face a sea of overwhelming choices, along with price comparison websites to help them navigate it. Customers are basing their choice on cost, yes, but with so much to choose from – the experience on offer can help differentiate insurers from the competition and win new customers.
With customers only contacting their insurers when they either need to make a claim - usually at a time of crisis - insurers need to use digital channels and customer insight to keep their customers positively engaged outside of times of crisis.
How can we stop customers from only engaging if there is a crisis?
Despite disappointments with their providers, consumers are still loyal to them. On average a person stays with their insurance provider for four years. However many are frustrated by not being rewarded for this loyalty. 42 percent of all respondents say not being rewarded for loyalty is the aspect of CX that needs improving most urgently.
Rewards can come in many forms, it can be creating and offering exclusive products and services to loyal customers. They could come in the form of partnerships with other brands such as discounts for certain restaurants. It doesn’t really matter how you reward customers, it’s just important that you do.
Be more responsive
In a world full of instant gratification, we do not handle waiting for what we want very well – we have the technology to thank for that. When we want something, we want it now and an area where insurers let down their customers is a lack of responsiveness. Nearly a quarter (23 percent) of consumers vented frustration with responsiveness, rising to 31 percent for Gen Z consumers.
In a digital age, demand and speed are everything. Businesses must look into ways where they can improve response speed, whether it’s via AI chatbots or real-time messaging services with staff, if insurers want engagement from customers outside of crises then insurers in the first place must first improve responsiveness.
The tech giants have well and truly won the personalization game. Spotify with their daily playlist mixes based on user behavior and their end-of-the-year wrapped campaign. Netflix with program suggestions and Facebook with customized newsfeeds – all three brands are winning at personalization and consumers love them for it.
The high standards have been set and consumers now expect the same levels of personalization from other services. 23 percent “expect personalized services” and would like “guidance and advice specific to them” from their insurer. How can insurers achieve this? By using data. Data can be used to offer services and products with a personal touch, it can also be used to streamline and improve underwriting and claims processes. With people being so loyal to their providers, it means providers have a wealth of data stored on their customers, why not use it for good and help improve the experience for them?
After all, user experience is the only way to differentiate in a highly commoditized market.
Teodor Blidăruș, CEO, Head Product Strategist and Co-Founder, FintechOS