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The strategy consulting firm Bain published in September its Customer behavior and loyalty in insurance, Global annual Report (Auto, Home, Health and Life). The study focuses on the international analysis (20 countries) of 172000 customers, their practice, their behavior and is particularly interested in link between customer’s loyalty and ecosystems.
More specifically, Bain’s goal is to analyze this last point in more detail. Indeed, the starting point is simple:
- In average, customers change insurance contract every 3 to 6 years
- More than half of the insured had no contact whatsoever with their insurer in the last 12 months.
Thus, how is it possible to leverage loyalty to attract or retain new policyholders.
It’s obviously about mastering the basics of customer relationship, which is not easy. However, the use of digital tools is not very useful when it comes to products for which the “touch points” with the insured are also not frequent. Bain shows a greater delight for the principle of ecosystems. For an insurer, this means to offer its customers products beyond the world of insurance. Those products are considered an extension to insurance products, and serve to complete the service provided. ( Note: in efficient language, Bain, we will avoid the periphrases of 3 lines and we will talk about “cross-selling”, albeit a little complex ).
Thus, the insurer must, to complement its offers, build its own ecosystem of partners to supply a global offer of additional services.
Shortly, here are the main services that can be provided.
The digital, a necessary condition …
Consumer expectations have been steadily rising around the world. The youngest, for example, no longer imagine any other user experience than that proposed by actors like Amazon, and this for all products. The feeling of consumer satisfaction is accentuated through mobile use. This is especially true in some countries like China, Malaysia or South Korea. However, digital is not everything. It appears that customer loyalty is not only a function of the digital channel. In reality, it is a multiple function, which relies on all the channels at the same time. Therefore, incumbents need to be able to satisfy both digital natives, who swear by the digital channel, and more traditional consumers who use all channels with often a preference for more conventional finalization.
Regarding digitization, the customization remains the main goal. Indeed, by systematically collecting the data, then applying algorithms and artificial intelligence, it is possible to simulate a more adjusted offer for the insured. The most complete form appears at Progressive, with the program” Name your price” , which is to offer the most appropriate insurance offer based on the price that the insured is willing to pay.
Nevertheless, the biggest threat to traditional insurers is even more complex. Giants like Alibaba work on complete financial services platforms (insurance, banking, payment, etc.). This does not stop in the tertiary sector, for example, Volkswagen or Tesla offer insurance offers coupled to their vehicles.
… but not enough!
In this fast-changing environment, major insurers have embarked on programs of deep transformation, such as Axa, which wants to change its positioning, from a payer status to a partner status. Those who position themselves at the center of partner ecosystems can do more than assessing risks, selling policies or handling claims! This is to provide the customer with a more complete experience with innovative solutions that will cover his lifestyle.
Thus, insurers can enter a virtuous circle: by providing more services, we obtain more commitments and more purchase from the insured, which provides new behavioral data that allow to emerge new needs.
It is thus the control of the interactions with the insured consumers that is the real determinant of the role that insurers will play tomorrow.
- Either they will be masters of the situation and will pilot one or more ecosystems
- either they will be marginalized and will only be service providers like others.
In addition, by positioning itself as the main supplier of a service ecosystem, the insurer has the opportunity to redefine its missions. Auto insurers, for example, no longer only cover motorists in the event of a claim. Thanks to on-board telematics boxes, they can offer additional services such as prevention or driver support. A comparable type of operation can obviously be observed also in health or for home insurance.
As this trend is just beginning and these operations take time to set up, the players who will be ahead of the game will consider taking advantage of a real leverage with their policyholders to promote loyalty.
Indeed, Bain studies show that ecosystems can improve fidelity. In addition, they can attract new policyholders and reduce price sensitivity. All insurers will not want such positioning. Indeed, this is a positioning on quality offers, and insurers seeking absolute price competitiveness will stay away.
The rest of the report is essentially based on a few key points and the results of the study conducted by Bain.
Personal note: If necessary, it is essential to refer now to the description and the method of calculation of the NPS ( here for example ), which will allow a better understanding of the following part.
Fundamentals of Fidelity: Creating Connections with the Customer
Points to remember:
- In the P & C (C & P) sector, there is a significant gap between leaders and laggards in the field of loyalty. This is valid almost everywhere in the world.
Personal note: The methodology used for the presentation of the figures is a little obscure. They calculate the Net Promoter Score of each insurer studied, then index the worst on 0 to ensure a possible comparison between all countries. Thus, Maif, who in France is leader, does not have an NPS of the order of 40, but has an NPS index of 40pts higher than the worst of the category. If the comparison principle can be interesting, it does not indicate anything about the raw NPS. Indeed, for the same gap of 40, if the NPS are 50 vs 90 it does not have the same meaning as 20 vs 60, and the report says nothing. 2 possible conclusions: either Bain considered this information with relative reliability, or, Bain wanted to keep this confidential information to better bill this to its customers.
- If the leaders do not change their positions, there are big changes in the middle of the table, with actors making catch-up movements.
- The more interactions between insurers and their policyholders, the more it seems to favor loyalty. The most glaring case is that of China: in 2017, the difference of NPS between insurers who had at least one contact with their insured and those who have not had is 59 percentage points! Clearly, if you are Chinese and have had contact with your insurer (it must have been positive, see next point), you are more likely to want to stay with your insurer, rather than go see the competition as if he were creating a kind of privileged relationship. For the record, this difference is 11 in France.
- There is a huge gap depending on whether the point of contact was positive or negative. The two extremes must read as follows:
- In Mexico, if you had an interaction that went well, then you will be extremely supportive (NPS = 89), whereas if you have not had it you will be a bit unfavorable (NPS = -27 ). Translation, we expect this to happen moderately, so we are very pleasantly surprised when it works well,
- In Japan, it’s the opposite. In case of favorable contact, the NPS is average (29), whereas in case of difficulty, the sentence is heavy (NPS = -94). Translation, excellence is a strong expectation, having quality is normal but not enough. On the other hand, not having it is unacceptable.
Delivering delight with digital: Making the experience unique
The points to remember are:
- In most countries, more than half of the customers are active on digital channels (active here means doing online research and having substantial interactions with suppliers).
- The use of mobile channels remains very low, especially in developed countries
- Although the uses are reduced, mobile channels seem to bring satisfaction, especially in Asia.
- Traditional channels have a hard time, and most policyholders still use them extensively. Digital use therefore complements these channels and not replace them.
- In most markets, policyholders who use only digital have lower scores than those who are more mixed. However, this phenomenon has been decreasing since 2014, according to Bain.
- The biggest challenge for insurers is to be able to offer digital enthusiasts truly personalized offers with relatively little data available.
Ecosystems: Insured people expect more than insurance from their insurer
The points to remember are:
- In all the countries studied, clients are open to their insurer offering additional services (beyond insurance). This phenomenon has been growing since 2016.
- The services acclaimed by business
- Ecosystems are just starting up and are not mature enough. Very few customers use more than 2 different ecosystems.
Increase insurance customers loyalty thanks to ecosystems
The key points are:
- When expected, the absence of this type of service justifies departure for competition. This suggests that there may be an advantage for the first arrived to attract new customers.
- Customers are willing to pay more for quality service