Is standardisation the key to building customer loyalty?

The coro­n­avirus pan­dem­ic has high­light­ed exist­ing prob­lems and cus­tomer dis­sat­is­fac­tion with tra­di­tion­al insur­ers. Prob­lems stem from a lack of trans­paren­cy and per­son­al­i­sa­tion, a clunky claims process and a dam­ag­ing price war. 

Could the answer be for the insur­ance indus­try to work towards stan­dar­d­is­ing poli­cies and offer­ings? The advan­tages of this are clear: greater trans­paren­cy and ease of use for cus­tomers. How­ev­er, it rais­es impor­tant ques­tions about how insur­ers retain their com­pet­i­tive edge and dif­fer­en­ti­ate them­selves if their prod­ucts are sim­i­lar.

“Stan­dar­d­is­ing poli­cies is only pos­si­ble to some degree because indi­vid­ual needs are becom­ing more spe­cif­ic,” says René Schoe­nauer, direc­tor of prod­uct mar­ket­ing, Europe, Mid­dle East and Africa, at Guidewire Soft­ware.

“With fac­tors such as hybrid work­ing and the gig econ­o­my, risk pro­files for indi­vid­u­als and busi­ness­es will change so fre­quent­ly that flex­i­ble, cus­tomer-cen­tric, on-demand and usage-based insur­ance cov­er will increas­ing­ly become more pop­u­lar as a route to mit­i­gate risk.”

This could be key to rebuild trust, cre­at­ing prod­ucts that are designed to meet cus­tomer needs, rather than an off-the-shelf solu­tion.

“The indus­try has strug­gled to keep up with rapid­ly chang­ing cus­tomer demands,” says Will Wood, head of life and health at INSTANDA, a dig­i­tal engage­ment plat­form for insur­ance.

“Cus­tomers are also demand­ing more trans­paren­cy and com­plete clar­i­ty on poli­cies they are tak­ing out. If insur­ers want to regain trust, they need to start giv­ing con­sumers what they need instead of try­ing to sell them prod­ucts they don’t.”

He says this requires a shift from a prod­uct-focused atti­tude to a cus­tomer-focused approach and requires insur­ers to embrace new tech­nolo­gies.

“This could be a mobile app that tracks dri­ving habits and rec­om­mends ways to increase dri­ver safe­ty, through to men­tal health ser­vices with pro­fes­sion­al life coach­es to keep employ­ees men­tal­ly fit for work,” says Wood.

Cus­tomers now want swift, accu­rate insur­ance quotes based on their indi­vid­ual needs today, not for their life as it was at the start of 2020, says Jef­frey Skel­ton, Europe man­ag­ing direc­tor for insur­ance at Lex­is­Nex­is Risk Solu­tions.

“They will expect a claim to be han­dled quick­ly and sym­pa­thet­i­cal­ly based on all the intel­li­gence insur­ance providers should have at their dis­pos­al,” he says.

Matt Con­nol­ly, chief exec­u­tive of Sønr, a mar­ket intel­li­gence plat­form designed specif­i­cal­ly for insur­ance com­pa­nies, says there is attri­tion at all stages in the rela­tion­ship with insur­ers from acqui­si­tion to renew­al to claims. For many cus­tomers, the only con­tact is the annu­al renew­al let­ter. On a per­son­al lev­el, he has switched from a tra­di­tion­al insur­er to a pay-by-miles motor insur­er because his renew­al pre­mi­um rose by £400 this year.

“Incum­bent insur­ers need to pro­vide sig­nif­i­cant­ly bet­ter cus­tomer expe­ri­ences across the entire cus­tomer jour­ney, from clar­i­ty of poli­cies through to pay­ing out claims quick­ly and fair­ly,” he says. 

In the race to retain and increase mar­ket share, price has become all impor­tant and yet this can leave gaps in cov­er that could dis­ad­van­tage con­sumers.

“The eas­i­est way to grow rapid­ly in insur­ance is to be cheap­er than your peers and to reduce prices, the temp­ta­tion is to cut down on cov­er,” says Peter Blanc, group chief exec­u­tive of char­tered insur­ance bro­ker Aston Lark and deputy pres­i­dent of the Char­tered Insur­ance Insti­tute.

“Look at house­hold insur­ance bought online,” he says. “Most poli­cies now don’t include acci­den­tal dam­age as stan­dard, where­as it used to be a com­plete­ly stan­dard cov­er.”

Instead, insur­ers should aspire to put con­sumers first, says Kei­th Povey, head of mar­ket­ing at review and cus­tomer insights plat­form Feefo.

“Con­sumers expect to receive a lev­el of ser­vice and aren’t afraid to make their voic­es heard,” he says. “They see hyper-per­son­al­i­sa­tion every time they buy a new car or new sub­scrip­tion ser­vice.”

One solu­tion is telem­at­ics, which is already estab­lished in the motor indus­try and is now being imple­ment­ed in home insur­ance cov­er.

“Telem­at­ics-based poli­cies encour­age respon­si­bil­i­ty and pos­i­tive cus­tomer behav­iour that empow­ers the pol­i­cy­hold­er to take a much greater stake in their own cov­er in exchange for sav­ings, while insur­ers mit­i­gate risk more effec­tive­ly,” says Craig Fos­ter, chief exec­u­tive of inter­net of things-enabled water leak detec­tor Leak­Bot.

A long-term eco­nom­ic down­turn post-COVID will increase pres­sure on con­sumers and busi­ness­es to con­sid­er if they are get­ting the best val­ue in insur­ance, chip­ping away at the nor­mal iner­tia found at renew­al time.

“Brands will need to earn their place on the con­sumer or busi­ness bal­ance sheet more read­i­ly than ever in 2021,” says DuBose Cole, head of strat­e­gy at Vayn­er­me­dia Lon­don.

Insur­ance brands such as Vital­i­ty Health already chal­lenge con­ven­tion with an empha­sis on max­imis­ing health rather than cur­ing ill­ness. This means week­ly or dai­ly inter­ac­tions with cus­tomers via wear­ables, rather than one sin­gle annu­al renew­al let­ter.

“As peo­ple process their own expe­ri­ences of the pan­dem­ic, they will think about which com­pa­nies and brands impressed them,” says Richard Exon, founder of Joint, a mar­ket­ing strat­e­gy agency.

“Too many of the big banks strug­gle to make a com­pelling case for the role they play in people’s lives. Instead, they have trad­ed on apa­thy and iner­tia while offer­ing rel­a­tive­ly poor val­ue for mon­ey. Peo­ple are wak­ing up to this and vot­ing with their feet.”

What’s more, there is a grow­ing open­ness to buy­ing insur­ance from non-insur­ance providers, in par­tic­u­lar Big Tech such as Apple, Face­book, Ama­zon and Google.

While insur­ance has often been seen as a tra­di­tion­al indus­try, a “mil­len­ni­al mind­set” is becom­ing entrenched, with con­sumers increas­ing­ly con­fi­dent in using dig­i­tal chal­lenger brands, rather than play­ing it safe with tra­di­tion­al mar­ket lead­ers, says Andi Dominguez, prin­ci­pal of glob­al insur­ance at Qua­di­ent.  

“This will be a win for the end-cus­tomer, who will have cheap­er poli­cies and excel­lent dig­i­tal expe­ri­ences offered to them,” she con­cludes.