Nearly one-quarter of consumers would consider purchasing insurance from Google or Amazon. Consumers’ plan to switch insurance providers puts up to $400 billion of revenue up for grabs.
Two-thirds (67 percent) of insurance customers would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon, according to new research by Accenture (NYSE:ACN) based on a survey of more than 6,000 insurance customers in 11 countries.
“Personalization clearly emerges as a key driver in retaining existing customers and attracting new ones. Innovation in pricing strategy and the ability to make their customers feel that they are unique are thus critical to capturing share within the switching economy.”
Forty-three percent of respondents, who could select multiple responses, said they would consider buying insurance from banks, almost one-quarter (23 percent) from online service providers, 20 percent from home service providers, such as telecommunication or home security companies, 14 percent from retailers and 12 percent from car dealers.
“Competition in the insurance industry could quickly intensify as consumers become open to buying insurance not only from traditional competitors such as banks but also from Internet giants,” said Michael Lyman, global managing director for management consulting within Accenture’s Insurance industry practice. “Overall, there is a significant switching risk and we estimate that up to $400 billion in insurance premiums could change hands within the insurance industry over the next 12 months. The switching risk is important in western markets but even more so in emerging countries such as China and Brazil, where insurance customers are even more likely to change providers.”
The research shows that loyalty in insurance is a key issue, with 40 percent of consumers likely to switch to another automobile or home insurance provider over the next 12 months. In the life insurance market, one-quarter (25 percent) of respondents said they were likely to cancel an existing contract and more than one-third (35 percent) said they were likely to take out a new contract with a new provider in the next 12 months.
Lower prices and more personalized service are the top reasons for consumers to switch to a new insurer, cited as important or very important in switching decisions by 87 percent and 80 percent, respectively, of the insurance customers surveyed. Forty-one percent of respondents said they were willing to pay more to get personalized advice when purchasing their insurance.
“The switching economy represents a huge opportunity for many insurers to gain market share,” said Lyman. “Personalization clearly emerges as a key driver in retaining existing customers and attracting new ones. Innovation in pricing strategy and the ability to make their customers feel that they are unique are thus critical to capturing share within the switching economy.”
Insurance customers are open to providing access to their personal data
The research also reveals that two-thirds (67 percent) of consumers are interested in mobile insurance services – such as sending pictures of their car to report a claim, or displaying their proof of insurance on their mobile phone – while less than half (46 percent) of the respondents that are mobile device owners have already used their tablets, and 37 percent of their smartphones, to deal with their insurers.
Also according to the survey, more than one-third (35% percent) of insurance customers are open to provide access to their usage or behavior information – such as car-usage or lifestyle information – if this can give them better value for their insurance coverage. Almost half (47 percent) of the respondents said it would depend on the information requested and only 18% were not comfortable doing so.
“While Internet access using personal computers or laptops was the first step in enabling customers to use digital channels, the real game-changer has been the growth in mobile,” said Lyman. “The mobile channel offers insurers the opportunity to take customer experience to the next level, enabling them to become partners of their customers’ everyday life by tailoring offers and interactions to the physical context, as location-based services can be highly relevant in insurance. For example, travel insurance-suggested offers can be sent to customers’ mobile phones when landing in an airport abroad, or a claim can be submitted from an accident scene with supporting photos. Also, as consumers become more open to providing access to their personal data, adoption of usage-based insurance enabled by telematics technology will accelerate.”
Chinese and Brazilian customers are the least loyal
The research indicates that Chinese and Brazilian insurance customers are the least loyal and the most interested in digital services:
- Chinese, Brazilian and British insurance customers are the consumers most likely to switch providers, with 81 percent, 75 percent and 57 percent of respondents, respectively, saying they are likely to switch to another automobile or home insurer over the next 12 months. At the other end of the spectrum, Canadians (23 percent), Japanese (24 percent) and French (24 percent) are the most loyal customers.
- Chinese, Brazilian and British insurance customers are also the most interested in purchasing insurance online, with 93 percent, 83 percent and 81 percent, respectively, of respondents expressing such interest.
- Chinese, Brazilian and South African consumers have the most appetite for new mobile-enabled insurance services, with 94 percent, 88 percent and 85 percent, respectively, of respondents saying they are interested in new mobile services that their insurers might offer.
- Chinese, Brazilian and South African consumers are paying the most attention to comments and recommendations posted on social media before selecting insurance providers, with 86 percent, 82 percent and 60 percent of respondents saying that they would consider these comments in making their insurance-buying decisions.
- Chinese, Japanese and Brazilian customers are the most open to give access to their usage or behavior information to optimize their insurance coverage, with 94 percent, 89 percent and 87 percent, respectively, of respondents saying so.
“Only those insurers with the digital capabilities and flexible operating model to adapt effectively to the changing demands of customers will be able to attract the large number of customers who are set to leave their less farsighted providers,” said Lyman. “Visionary insurers must also be prepared to conceptualize their business more broadly, building online communities and offering non-insurance services – such as USAA helping its customers buy cars – and be willing to create ecosystems of partners who together can provide the total, personalized and convenient experience today’s customers expect.”
Among the survey’s other findings:
- More than two-thirds (71 percent) of consumers surveyed would be ready to buy insurance online, such as travel and assistance policies, extended warranty, home insurance or life insurance products.
- More than half (54 percent) of respondents are interested in gaming solutions that insurers may offer to help them better manage risk coverage and lower premium rates.
- Almost half (48 percent) of respondents said they would consider comments on social media in making their insurance-buying decisions.
Examples of innovative insurance services
The research cites the following examples of insurers that are taking advantage of digital innovation to offer customers better prices and more relevant services, including services outside of their traditional business:
- U.S. insurer Progressive has launched “Name Your Price” – an online tool that collects basic information from prospective customers, including their auto insurance budget, recommends a package that matches this budget, and then allows the customer to adjust the price, adding or removing insurance features to create a tailored package that achieves the best balance of suitability and affordability.
- A different approach to making auto insurance affordable and personalized is telematics technology, which is increasingly being offered by the UK online carrier Insurethebox. Customers buy miles of coverage in advance. They then allow their car usage to be monitored by an onboard device, and top up their insurance when their miles run low. They are rewarded with bonus miles for safe driving, and for purchasing any of a wide variety of goods from the insurer’s ecosystem of retail partners. Retention is strengthened by the customers’ perception that their insurance is priced specifically for them, as well as by the appeal of the loyalty program.
- USAA helps its members buy cars – they simply state what type of car they are looking for, options they want, where they live, and the insurer’s certified dealer network will send back quotes as well as closest points of sales. USAA also guarantees lowest prices by refunding members the difference if they find the car at a lower price within four days of purchase. This approach implies deep flexible business and operating models that enable the insurer to keep on innovating the member experience.
Accenture commissioned a survey of 6,135 owners of life and/or auto and home insurance policies in 11 countries. The online survey was designed by Accenture and conducted by Lightspeed Research in July 2013. The 6,135 respondents included 1,012 from the U.S., 520 from Italy, 516 from Brazil, 512 from Japan, 511 each from the UK, France, Spain, Canada and South Africa, and 510 each from Germany and China.