For a long time, mass market insurance has suffered from a bit of a bad reputation. At best, it is seen as a boring, necessary evil – at worst, as a means of corporate daylight robbery.
Directly contributing to this perception is commoditisation driven by online aggregators and a small number of underwriters white labelling for retailers. On top of this, regulation makes it difficult for insurers to innovate and therefore differentiate their products. As a result, insurance has not enjoyed the same levels of excitement around fintech that we have seen in other areas of the financial services sector.
For consumers, insurance defines ‘low interest’. When renewal time comes around and the new premium seems too high, consumers shop mainly on price as comparison sites make it easy to compare the one thing they understand: cost, with familiar brand names helping them make a choice.
Once a consumer has an insurance policy, there is no real connection with the provider, unless a claim is made, and the general (often unfounded) perception of the claims process is that it is complicated and unlikely to bear fruit. Either because there will be no pay out due to some obscure loophole in the small print, or because the claim will negatively impact next year’s premium. Claimants expect to be treated as though they are ‘guilty until proven innocent’. What other service makes their customers feel like this?!
At Nile, we discovered the above during some informal research into the key touchpoints of a policyholder’s lifecycle, and identified these general attitudes at every stage of the customer journey.
Our view is that, if brand values are to drive brand behaviours, insurance companies need to build ways to clearly demonstrate extra value at each stage of the engagement loop. This is essential to stand any chance of building a relationship with their customers based on loyalty and trust, rather than cost or familiarity.
Brand values need to connect with real consumer insight and insurers would benefit greatly from investing in ways to create experiences for their customer that make these brand values tangible and rewarding – to ‘story do’ rather than story tell.
Based on our market analysis, we identified three key trends where challengers and new entrants are beginning to influence how these brand relationships can be built.
Key trend 1: People matter
Traditionally insurance was a community affair, and there are still some mutuals out there. In addition to this startups are building new business models based on crowdfunding and peer-to-peer finance to give this concept a modern twist. Customers feel like they are getting something back, even if the money is re-invested in the community pot, or given to good causes.
Brands like Lemonade and Guevara are leading on this initiative. If these challengers succeed in appealing to the mass market, traditional insurers will struggle to communicate where their customers’ money goes.
Key trend 2: Qualified rewards
What if you were rewarded with lower premiums or other perks for good behaviour? Some insurers use technology to do this and provide their customers with the means to track positive action. Vitality Health lowers costs and provides discounts for customers who exercise and eat well, and Aviva and Tesco Bank use tracking apps and telematic technology to reward sensible driving.
There are parallels here with the energy sector, where customers see direct reduction in their bills if they use energy-saving light bulbs or install insulation. What is to stop insurers from giving customers discounts if they install approved locks or safety devices? If this trend becomes more prevalent, customers will expect this level of responsibility from their insurance providers.
Key trend 3: Trust building promises
A number of insurers are now promising to ask fewer questions when customers make a claim, the implication being that they are more likely to pay out. With this guarantee, customers are less likely to be turned off by higher premiums. There is opportunity for insurers in this area to consider their audiences and target niche protection at areas where other providers would refuse.
Insurers may face more complex regulations than other areas of financial services, but regardless customer expectations are becoming more demanding in response to new fintech offerings. It’s clear that insurers need to take risks in order to stand out in the market – and improved propositions should be built on real customer need and insight that demonstrate empathy and understanding.
We’ll be spending this year learning more about how consumers feel about the brands who are challenging the status quo and hoping to break the inertia that is so prevalent in this industry. If you’re an established player or just starting up in the insurance market, with a proposition, product or service you want to further define, develop and validate, we’d love to work with you.