Global: what does the Voice of the Insurance Customer tell us about customer needs and behaviour?

Ernst & Young have issued a report titled “Voice of the Customer, Time for Insurers to Rethink Their Relationships 2012”.  This report is based on a survey of 27,000 customers across 7 regions and covering 23 countries.  Here is the global summary:  EY-Global-Report-Global-Consumer-Insurance-Survey-2012.    I found this report, along with the webcast I attended, interesting and as such I wish to share with you the aspects that caught my attention.

What’s new?  Consumer behaviour and expectations are changing rapidly

This is how the EY report puts it:  “Customer behavior is changing rapidly. Technology, and in particular the growth of online and social media, is driving a fundamental shift  in customer expectations in terms of how products are marketed, priced, sold and serviced, and how companies are perceived. Pure internet businesses have set new standards for customer-centricity and engagement that raise the performance bar for players in every retail business sector.”

What is the key challenge for insurers?

There is a fundamental, structural, chasm between customers and insurance companies.  Insurers are product and/or intermediary centric models.  Buyers of insurance are looking for insurance companies to be customer-centred. The key challenge for insurers is to make the transition to a customer-centric mindset, business model and operating design.  This is a big ask because insurers in the mature economies (e.g. USA and Europe) as they have ‘extensive legacy operations’.  For example, just changing the IT platform (all the IT systems including all the associated databases) to enable a customer-centred operating mode is a huge challenge.  Another challenge is gluing up the channels so as to enable the insurance buyer/customer to interact seamlessly with the insurer using channels of his/her choice – including switching channels in the midst of doing a job e.g. researching and buying.

What does the global survey tell us about the needs of insurance buyers / customers?

Whilst the majority of customers are satisfied/highly satisfied there is a sizeable minority of buyers who are not confident the product is right for them. Why?  The information that these buyers need (and the way that they need it presented) is missing.

They want to be able to trust insurance providers and build long term relationships.  Specifically, they want to be confident that the products that insurers are selling are right for them (the buyers) and meet their needs.  In other words, they want to be certain that what they think they are buying is what they are buying – no misleading words, no hidden catches and exclusions…

Insurance buyers are looking for a transparent and simple products along with a simple, transparent and convenient buying process.  Notice that the buyer wants insurers to make it easier for them to understand the products on offer, to pick the right one and then easily buy using the channels that are most convenient including switching between channels (e.g. web and call-centre or vice versa).

Customers are looking for value to be clearly demonstrated, reflecting a balance of price, product features and service tailored to their needs.  The more competitive the market the more important it becomes for insurers to demonstrate the value that they are providing other than price.  In other words answer the question “Why should I buy from you and not your competitor who has as similar product at a similar price?”

Customers expect the insurance provider to deliver against the buyers expectations of the product and of customer service.  In other words the ownership phase and associated customer experience matters to customers even if it does not rank that high for many insurers.

How well are insurers doing against these needs and expectations?  According to EY: “The survey shows that the customers’ perceptions are that the industry is failing to deliver this in some key areas.”

Are there any big differences between life and non-life insurance from a buyer / customer perspective?

I noted two big differences, in the word of EY:

“Non-life insurance lends itself more to internet purchase than life and pensions, given the higher customer familiarity and comparability of the products. In all countries we found a growing trend to use the internet to research non-life products, although levels of actual purchase vary considerably between countries.”

“In non-life insurance, price is often the main measure of value since products are more comparable and frequency of purchase drives greater customer familiarity. But in some territories, brand and reputation are more important criteria.  In highly competitive markets characterized by price transparency, there is a tendency for prices to converge. This leads to non-price factors such as brand becoming more important selection criteria as customers search for a way to differentiate between providers.”

What does EY recommend for non-life insurance?

EY advises insurers to focus on convenience and value by:

Providing a seamless customer experience by integrating online and offline channels. Thus allowing the insurance buyer / customer to  use whichever channel works for her at a particular point in time and be able to swap channels and continue where she left off, seamlessly, in the previous channel.  Notice this means integration such that any and all customer related data is shared across channels – a single view of the customer that is in operation in real-time.

Making it easy (simple, convenient) for insurance buyers to buy and for customers to renew – across whichever channel/s they choose to use. For my part I do not believe that EY go far enough.  It is also important for insurers to demonstrate value of choosing / sticking with the insurance providers.

Making the customer feel valued after he has purchased and before the renewal comes up. This has to do with useful communications from the insurer to the customer during the ownership phase AND a service culture that ensures that the customer’s experience of interacting with the insurers matches his/her expectations.  Incidentally, the research shows that a poor claims experience drives churn but a positive one does not drive loyalty – customers expect to be treated well during the ownership phase.

Segmenting the customer base and understanding the needs, behaviours and profitability of each segment. This will allow you, the insurer, to manage the risk and improve retention in a profitable manner.

Developing and manage insurance brand(s) so that the value proposition and key messages are clear and communicated effectively in/across the digital world.

What does EY recommend for life and pensions insurance?

EY advises a focus on improving customer trust and confidence by:

Putting the customer at the centre of the business model: offering the right product, at the right time, to the right customer and following through with service that matches the customers expectations and responds to his/her needs – needs change.  Clearly this means building and exploiting a customer insight capability.

Working with intermediary channels AND building a direct relationship with buyers / customers so as to generate insight, anticipate and meet their needs. The key challenge with the intermediary is to drive the right behaviour – behaviour that creates value for customers and enables longer term relationships.

Putting together a suite of simple (to understand) and transparent products that meet the needs of customers.   The idea is to enable the customers to buy easily – with confidence.

Making it easy for buyers / customers to access relevant (and easy to understand) information and products online – supported by offline personal interactions where necessary.

Building trust by crafting and delivering a great customer experience across touchpoints, across the customer journey.

Rewarding customer loyalty with incentives that recognise the worth (LTV) of the customer’s purchasing behaviour and loyalty.

Improving customer retention by doing a better job of getting at and dealing with the underlying drivers of churn.

Final Words

I will be doing a follow up post which dives specifically into the findings for Europe.  I have a vested interest in this as I believe that would be of service to a group of people that are near and dear to me.

I wonder if all categories of non-life insurance show the same customer needs and behaviour.  Might there be a category or two that is a mix of life and non-life needs?

Author: Maz Iqbal

Experienced management consultant working at the intersection of strategy, customer, and technology. Combine a tendency to think strategically with a penchant for getting my hands dirty at the coalface of implementation.