Coronavirus has turned a spotlight on the insurance industry’s failings, now insurers must be bold to rehabilitate reputations and regain trust
The coronavirus pandemic has highlighted existing problems and customer dissatisfaction with traditional insurers. Problems stem from a lack of transparency and personalisation, a clunky claims process and a damaging price war.
Could the answer be for the insurance industry to work towards standardising policies and offerings? The advantages of this are clear: greater transparency and ease of use for customers. However, it raises important questions about how insurers retain their competitive edge and differentiate themselves if their products are similar.
“Standardising policies is only possible to some degree because individual needs are becoming more specific,” says René Schoenauer, director of product marketing, Europe, Middle East and Africa, at Guidewire Software.
“With factors such as hybrid working and the gig economy, risk profiles for individuals and businesses will change so frequently that flexible, customer-centric, on-demand and usage-based insurance cover will increasingly become more popular as a route to mitigate risk.”
This could be key to rebuild trust, creating products that are designed to meet customer needs, rather than an off-the-shelf solution.
“The industry has struggled to keep up with rapidly changing customer demands,” says Will Wood, head of life and health at INSTANDA, a digital engagement platform for insurance.
“Customers are also demanding more transparency and complete clarity on policies they are taking out. If insurers want to regain trust, they need to start giving consumers what they need instead of trying to sell them products they don’t.”
He says this requires a shift from a product-focused attitude to a customer-focused approach and requires insurers to embrace new technologies.
“This could be a mobile app that tracks driving habits and recommends ways to increase driver safety, through to mental health services with professional life coaches to keep employees mentally fit for work,” says Wood.
Customers now want swift, accurate insurance quotes based on their individual needs today, not for their life as it was at the start of 2020, says Jeffrey Skelton, Europe managing director for insurance at LexisNexis Risk Solutions.
“They will expect a claim to be handled quickly and sympathetically based on all the intelligence insurance providers should have at their disposal,” he says.
Matt Connolly, chief executive of Sønr, a market intelligence platform designed specifically for insurance companies, says there is attrition at all stages in the relationship with insurers from acquisition to renewal to claims. For many customers, the only contact is the annual renewal letter. On a personal level, he has switched from a traditional insurer to a pay-by-miles motor insurer because his renewal premium rose by £400 this year.
“Incumbent insurers need to provide significantly better customer experiences across the entire customer journey, from clarity of policies through to paying out claims quickly and fairly,” he says.
In the race to retain and increase market share, price has become all important and yet this can leave gaps in cover that could disadvantage consumers.
“The easiest way to grow rapidly in insurance is to be cheaper than your peers and to reduce prices, the temptation is to cut down on cover,” says Peter Blanc, group chief executive of chartered insurance broker Aston Lark and deputy president of the Chartered Insurance Institute.
“Look at household insurance bought online,” he says. “Most policies now don’t include accidental damage as standard, whereas it used to be a completely standard cover.”
Instead, insurers should aspire to put consumers first, says Keith Povey, head of marketing at review and customer insights platform Feefo.
“Consumers expect to receive a level of service and aren’t afraid to make their voices heard,” he says. “They see hyper-personalisation every time they buy a new car or new subscription service.”
One solution is telematics, which is already established in the motor industry and is now being implemented in home insurance cover.
“Telematics-based policies encourage responsibility and positive customer behaviour that empowers the policyholder to take a much greater stake in their own cover in exchange for savings, while insurers mitigate risk more effectively,” says Craig Foster, chief executive of internet of things-enabled water leak detector LeakBot.
A long-term economic downturn post-COVID will increase pressure on consumers and businesses to consider if they are getting the best value in insurance, chipping away at the normal inertia found at renewal time.
“Brands will need to earn their place on the consumer or business balance sheet more readily than ever in 2021,” says DuBose Cole, head of strategy at Vaynermedia London.
Insurance brands such as Vitality Health already challenge convention with an emphasis on maximising health rather than curing illness. This means weekly or daily interactions with customers via wearables, rather than one single annual renewal letter.
“As people process their own experiences of the pandemic, they will think about which companies and brands impressed them,” says Richard Exon, founder of Joint, a marketing strategy agency.
“Too many of the big banks struggle to make a compelling case for the role they play in people’s lives. Instead, they have traded on apathy and inertia while offering relatively poor value for money. People are waking up to this and voting with their feet.”
What’s more, there is a growing openness to buying insurance from non-insurance providers, in particular Big Tech such as Apple, Facebook, Amazon and Google.
While insurance has often been seen as a traditional industry, a “millennial mindset” is becoming entrenched, with consumers increasingly confident in using digital challenger brands, rather than playing it safe with traditional market leaders, says Andi Dominguez, principal of global insurance at Quadient.
“This will be a win for the end-customer, who will have cheaper policies and excellent digital experiences offered to them,” she concludes.