If traditional insurance companies won’t communicate effectively with their customers… who else will?
Tomorrow’s industry leaders could include some different but familiar names.
Uncertainty still prevails around the pandemic and its future impact on businesses of all kinds – including insurers.
Nonetheless, it seems fair to say that recovery is tentatively underway, at least in some developed economies. Deloitte’s mid-year 2021 survey of the US market reports that most insurers are primed for growth as the economy rebounds.
But Covid-19 has changed the world in which this growth will take place – including consumers’ perceptions of insurance and the kind of customer experience they will want and expect from their providers in the future.
Life and health insurance, of course, could obviously benefit from increased awareness of the need for protection against ill health and mortality.
And the growth in telematics has undoubtedly been accelerated in many markets by the huge reduction in car usage by the millions who have worked from home over the last two years. We can now expect usage-based insurance to become much more prevalent in areas beyond just motor.
But over and above all this, the pandemic has led to consumers around the world experiencing a far more immediate and responsive relationship with providers of all kinds –without leaving home, usually via digital channels.
The new, more remote, “normal”
Whether it’s ordering home delivery groceries, rather than visiting retail premises, or consulting a doctor on screen, instead of face-to-face – customers have become more accustomed to remote relationships, with no face-to-face contact.
What’s more, those new relationships are 2-way in nature. Customers increasingly expect to receive highly personalised and timely communications and offers from the providers they deal with – based on the data they have provided through these remote transactions.
But effective customer communication is an area in which insurance has historically fallen behind other industries. Many long-term insurance customers still hear nothing from their providers for years on end.
The 2021 Insurtech Report from Capgemini/Efma highlights this ongoing issue, finding that more than 58% of US life, health and P&C insurers did not reach out to their customers during the pandemic.
As a result, the report concludes that the global insurance industry lost 3% of its customer trust and customers increasingly considered insurance sources beyond traditional companies.
“In fact, willingness to explore coverage from new players (such as BigTechs) rose 11% in 2020-2021, according to our 2021 Voice of the Customer survey.
“So, while the demand for insurance is growing, incumbent insurers might not be the beneficiaries”
So how big is the BigTech threat?
The BigTechs have access to vast quantities of customer data and intense experience in delivering a fully personalised, relevant and responsive customer experience. And of course, they also have very deep pockets.
However, there has been a widely held view that the highly regulated nature of the insurance business could discourage them from seriously entering the sector.
But more recent moves, although limited so far, from giants such as Google, Amazon, Apple and Tesla certainly indicate that change is on the way.
In fact, there’s a growing expectation in insurance circles, that the threat is real and increasing.
What should traditional insurance companies do to protect market share?
As I’ve already mentioned in this article, and many times in the past – most established insurance companies don’t communicate as often as they should with their existing customers.
The past two years, in particular, have been a period of great uncertainty and worry for most customers. The essential purpose of insurance is to protect and reassure. Good communication is obviously key to this.
So perhaps insurers should stand in the shoes of their existing customers and ask themselves how they can communicate with them in a way that reassures and reinforces the value and protection of the products they already hold.
In addition, they should consider what the BigTechs so successfully do to build business and loyalty in other sectors – by offering additional value that’s highly personalised and relevant, based on the insight delivered by the extensive customer data available to them.
In fact, this is precisely what we at Riverside have been doing with insurance companies around the globe since we were formed in 2005.
The communication programmes we develop for life and health insurance companies include fully personalised upgrade or cross-sell offers to every existing customer included. And usually, 10%-30% of customers accept the offer.
What’s more, helpful, personalised customer communication improves overall policy persistency. In the 12 months following a Riverside programme, we typically see a reduction in lapse rates, on existing policies held, of between 12% and 30% . And this is across all customers receiving the communication – not just those accepting the offer of additional insurance.
The communication programmes we develop also help our insurance clients boost the loyalty of their distributors, including agents, affinity partners and other intermediaries. This is because the programmes deliver additional commission income for distributors for little or no additional effort – and also generate new leads from existing customers for higher-value sales opportunities.
If you’d like to find out more about how Riverside could help protect your insurance business in the face of increased market competition, please contact us today.