Ernst & Young’s Global Insurance Customer Survey released this week highlights how a combination of increased expectations and accessible technology mean that the insurance industry is now facing a far more demanding customer and that those suppliers who fail to make a rapid move to a more consumer-friendly business model risk being left behind.
Shaun Crawford, global insurance leader at Ernst & Young, comments “The expectations of consumers are constantly evolving and the insurance industry has not always managed to keep pace. Our survey found that, while of course there are variations in customer attitudes and behaviours around the globe, there are some remarkably consistent underlying themes about what consumers want and where they expect more from insurers.
The survey of 24,000 insurance customers across 23 countries underlines that globally the consumer is more active and better informed–over two-thirds of consumers will proactively research their next purchase, more than double those who researched their last purchase. Consumers have high service expectations, but a substantial majority of them are reporting little or no proactive communication from their suppliers and think that insurers have fallen behind other sectors in customer service and rewarding customer loyalty.
As Crawford explains, “Consumers are taking a much more proactive approach to educating themselves about their products and their needs and there is frustration with the industry’s apparent lack of transparency. Consumer expectations in terms of service standards and rewards for loyalty are already being met by other service industries and the modern customer wants to see the same from their insurer. Unless the industry addresses these issues quickly, we expect switching rates to increase in the next decade and that non-traditional providers with better service platforms could use the opportunity to take market share.”
The majority of consumers across the globe believe that the life and pensions industry is trailing in service standards and in rewarding customer loyalty. The survey results were fairly consistent across all regions and both life and non-life, with 65-75% of consumers who had an opinion agreeing with the statement that insurers trail other industries in rewarding customer loyalty and 60-70% of respondents who had an opinion agreeing that service levels in insurance lags other industries.
Crawford added “The results are clear-the global consumer is used to the multichannel, consumer-friendly approach of other service industries, and wants insurers to match them. Keeping customers is no longer just about price or brand, building a two-way relationship will be key to the success of the industry in the future.”
The survey results show that across the globe that despite the financial crisis, consumers have not lost faith in insurers; they trust the industry and satisfaction levels are high, averaging 7/10. Consumers are reluctant to change provider, but insurers are losing their customers through inaction.
Around 75% of consumers across the globe reported a lack of contact from their existing provider at the point at which they were due to renew their non-life insurance, with over half of consumers in Europe and the Americas reporting that they received no contact at all.
More effort is being made to communicate with and retain life and pensions customers but this is geographically very mixed, with 46% of consumers in Asia Pacific saying they felt their insurer had made a great or fair amount of effort, compared to just 30% and 24% in Europe and the Americas respectively. The high level of contact in Asia-Pacific reflects the agency model that operates in the region.
The level of consumers switching providers in life and investments policies may at first glance appear relatively low- on average only around 10% of those surveyed globally have changed their provider in the last five years, but for products with a 25-year life, however, this is a significant degree of churn. Switching levels in non-life are higher, with around a quarter of consumers having switched provider in the last five years, (Europe 32%, Americas 24%, and Asia Pacific 22%).
“The increasing level of churn in both life and pensions and non-life can’t be ignored. There is a change of mind-set needed when it comes to interaction with and services provided for customers. The largest reason for consumers changing provider, affecting a third of respondents, was that their needs changed and their insurer could not meet their new needs. Many insurers are clearly failing to anticipate and address the changing needs of their customers. The challenge for insurers is to take this information and turn it to their advantage,” added Crawford.
Consumers are now proactively researching their options
Around 70% of consumers surveyed intend to research their next life and pensions purchases. This represents a significant rise as just a third of consumers researched their last purchase.
The use of online resources to research insurance products is also set in increase dramatically over the next few years. The use of comparison websites to research life and pensions products is set to more than double in all the regions, as is the use of other independent online sources while the use of blogs is set to triple.
Independent research is already more established in the non-life market but we are still set to see considerable increases in this market. Around two thirds of consumers intended to research their next non-life purchases, a rise from around 40% who researched their last purchase. 37% of consumers intended to make more use of comparison websites and 20% of consumers intended to make more use of blogs.
Crawford says “Consumers have traditionally turned to third parties, including family members and personal financial advisers but the survey highlights a global trend towards using online sources for third party validations, be that price comparison websites or blogs.
The rise of new technologies does not mean that existing channels will become obsolete, but consumers will expect a seamless, consistent response from insurers and so the new channels need to be integrated effectively. The impact of online comparison sites in the UK market can be taken as a case study in how fast these tools can change a market and customer expectations. For example, 57% of consumers now use online sources for research of non-life products in the UK, which is well above the regional average.”
Well over a third of consumers surveyed find the life and pensions products on the market too complicated. They would like to see simple and more transparent products. More than a quarter of consumers in every region surveyed said that they would reconsider switching provider if they could guarantee more transparency on the products and better communication about product performance.
“The need for clarity and transparency in the buying process is not driven purely by customer preferences. As a result of the financial crisis, regulators around the globe are focusing on protecting consumer interests more than ever before, with major new regulations being introduced in the EU and many other markets around the world. Insurers that align themselves to a truly customer-centric model will find the transition to the new regulatory environment less painful, and will gain competitive advantage,” concluded Crawford.
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