Bain & Company’s new report, titled “Customer Behavior and Loyalty in Insurance: Global Edition 2023,” states that consumers are seeking help from insurance companies to reduce and even prevent risks that pervade their lives, rather than just providing capital to cover losses. The report confirms that consumers see a greater role for insurers than merely delivering the basics of coverage. The changes in consumer behavior and attitude have come about due to the turbulence and uncertainty of recent years, including extreme weather events, disease, and the Covid-19 pandemic, aging populations, and technological disruptions that are combining to radically change the risk landscape, both through more risks and different types of risk.
The report shows that consumers overwhelmingly want risk prevention and mitigation services from their insurers. In Brazil, 97% of survey respondents indicated an interest in risk prevention, while 81% of respondents from Japan also expressed interest. Additionally, more than 40% of millennials are willing and interested in paying for life insurance that includes risk prevention. Consumers are seeking solutions that will reduce risks and create a safer future.
The report also reveals that consumer attitudes and behaviors have become increasingly purpose-driven in ways that extend beyond preventing risk. Consumers want insurers to embed environmental, social, and corporate governance (ESG) initiatives into their proposition, and 59% globally want life insurers to reward them for healthy living. Insurance companies need to redefine their role in the wake of these changes in consumer attitudes.
To meet the changing demands of consumers, insurance companies need to shift away from a transactional role to broader relationship-based consumer interaction. Insurance agents, who historically pushed out offerings with a pitch, now need to pull in customers by addressing their priorities at the right moments. Technology, including digital tools and advanced analytics, will enable insurance companies and their agents to make this shift.
The report provides examples of insurers that have already started to offer promising risk-reduction services. For instance, one European health insurer has launched such services for three customer segments. It offers connected health apps for coaching and other purposes and has enlisted partners ranging from doctors to nutritionists. User sign-up has been brisk and largely free of churn. In automotive coverage, one insurer has long experience with telematics, targeting customers in regions with high levels of theft and high premiums. Some 40% of policyholders have converted to the service, partly because of a simple online sign-up process aided by the salesforce. The insurer plans to expand services through a partnership with an automaker, and by signing up repair garages, gasoline stations, and used car dealers. Its aim is to eventually create a one-stop platform for theft recovery, toll and tax payment, immediate vehicle assistance, and more.
The infrastructure for risk-prevention services has improved in recent years, with customers owning more connected devices and being open to sharing data with insurers. However, the report suggests that most insurers have yet to seize the opportunity to redefine their role and deliver on the changing expectations of customers.
Furthermore, consumers now seek higher-order elements of value, such as ethics, purpose, and hope, from insurers. According to the report, 80% of respondents globally want insurers to embed ESG initiatives into their proposition, while 59% want life insurers to reward them for healthy living. However, insurers have not been delivering a lot of value on these elements in the eyes of consumers.
The report suggests that delivering more value to customers can boost both loyalty and revenue growth. Insurers that embed purpose into their brand promise and deliver on that promise can ignite meaningful growth with a strategy centered on leading with a winning purpose.
Insurance Customers Increasingly Turn to Digital Channels Despite Dissatisfaction, Report Finds
The COVID-19 pandemic and associated lockdowns had a profound impact on consumer behavior, prompting many insurance customers to adopt digital channels for the first time. However, the report, which analyzed insurance customer behaviors in the United States over the past three years, found that digital adoption has continued to increase, but typically in a hybrid combination with offline channels.
While customers are having fewer in-person interactions with their insurers, the report suggests that they are not necessarily migrating to digital self-serve channels, which have grown mostly for research and to a lesser extent for purchasing. Instead, customers are increasingly using email to communicate with their insurers.
According to the report, the slow adoption of digital self-serve tools for different episodes ties directly to failure rates in a digital transactions, which can be as high as 31% in US auto insurance.
The report suggests that for each particular episode, the mix of channels strongly influences customers’ perceptions of the experience. Digital channels have a higher likelihood of delighting customers for simple episodes such as paying a bill. However, customers prefer a human-digital combination for more complex episodes such as filing a complicated claim or seeking advice.
The report recommends that insurers implement a differentiated channel strategy that takes into account the specific needs and preferences of customers for each episode. At the same time, insurers must make digital processes as simple and convenient as possible for episodes that lend themselves to self-service.
The report also identifies several factors that contribute to customer satisfaction in the insurance industry. These include the ability to easily access information, responsive customer service, and accurate billing and payments. Insurers that can provide a seamless, omnichannel experience across all customer touchpoints are more likely to retain customers and attract new ones.
However, the report suggests that insurers must continue to prioritize customer experience and satisfaction as digital adoption continues to grow. Failure to do so risks losing customers to competitors who provide a better digital experience.
The report also highlights the need for insurers to be transparent and clear in their communications with customers. Insurance policies can be complex, and customers often struggle to understand the terms and conditions. Insurers that can simplify their policies and communicate them clearly to customers are more likely to engender trust and loyalty.
The report concludes that a differentiated channel strategy is needed to meet consumer needs and preferences for different episodes, while digital processes must be made as simple and convenient as possible for self-service episodes. Insurers must also focus on creating an omnichannel experience for customers that is consistent across all channels, while also ensuring that consumers have access to human interaction when needed.
The report’s findings have important implications for the insurance industry, which has seen a significant shift in customer behavior over the past year. Insurers must adapt to these changing preferences and behaviors by implementing a differentiated channel strategy that meets the needs and preferences of their customers. This strategy should be focused on creating a seamless omnichannel experience for customers, while also ensuring that customers have access to human interaction when needed.
