Written by Mark Andrews on Wednesday 17 February 2016
Following on from the first great revolutionary advance in the GI market to allow personal lines customers to buy insurance direct over the telephone (!), the introduction of Aggregators or Price Comparison Websites (PCWs) once again revolutionised the retail insurance market. But has this revolution changed the insurance industry for the better from a customer point of view?
The obvious answer is “Yes” - insurance is more accessible than ever, leading to more competition amongst insurance carriers, meaning they are having to fight harder for our premium, prices have dropped and therefore customers are better off. “Simples”, as a certain meerkat would say! But some might argue that the introduction of PCWs, has forced insurance carriers to fight so hard for customers that a race to the bottom has become inevitable, therefore customer service and trust with your customer is no longer possible (or necessary!) as there is so much churn in the market. As Amanda Blanc (CEO, AXA UK & Ireland General Insurance) pointed out at a recent Marketforce event, Insurance carriers have a worse Net Promoter Score than estate agents today!
The “P” in PCW has historically forced this race to the bottom. What if they started life as CCWs –where Coverage (or customer requirements) was the main reason behind choice of product and the price was second? This price driven choice has led insurance carriers into designing products that are not completely fit for the customer, could lead to under-insurance, inappropriate product selection and surprises mid-term. Yes, the PCW offerings are much richer now, displaying available Add-ons and allowing easy configuring of excesses and other covers such as sum insured, accidental damage, personal accident, courtesy car and windscreen cover. But do these extra comparison factors mean that a unit/certificate of insurance is now as easily commoditised as a unit of electricity or gas?
A typical new customer is not a “profitable” customer for approximately 3 years from an insurance carrier point of view. So new business price and coming top 5 in the PCW lists is the short term goal to entice customers away from their existing carrier. Insurance carriers need to get a bit smarter from a customer engagement perspective in order to improve retention – it shouldn’t be simply about price. Could the FCA help by introducing other measures to encourage customers to look at the “softer side” of insurance to encourage longer term thinking and change the message from being perpetually on new business price?
The introduction of “hidden” fees and charges over last few years was the insurance industry’s response to falling premiums. But this response has just intensified the lack of trust between insurer and consumer (http://www.bbc.co.uk/news/business-33937806). Should transparency around claims and renewal experiences be factored into the point of quote/sales customer journey? And would the addition of these factors turn around what is seen as a grudge purchase from an untrusted industry? Could the FCA drive more appropriate customer and carrier behaviour/cohesion by mandating inclusion of the “soft” measures such as customer NPS score or complaints volumes. Or perhaps displaying typical/average fees for a particular MTA.
Some traditional carriers (and new entrants to the market) are using gamification via mobile apps to encourage this, whilst also capturing valuable driver activity to improve pricing. Rewards such as free coffees and tickets to sporting events, or simply introducing a bit of sibling rivalry to encourage better driving habits may seem like marketing gimmicks, but it’s a refreshing move to encourage more long term customer loyalty.
Finally, with the FCA’s latest consultation paper (CP 15/41) around disclosure of last year’s premium on renewal notices inevitably introducing more customer churn and even more focus on new business premium – how will insurers react? Will it encourage more “traditional” carriers sitting on profitable “closed book” policies (and by implication, expensive legacy IT estates) to think about moving to a simpler, low cost product to free up investment for more innovative products? Here’s hoping it will encourage insurance carriers to focus on building a new era of customer engagement, customer loyalty and perhaps even make the insurers more popular than estate agents!