Consumers across the world are slowly emerging from crisis mode after two long years spent in the grip of the COVID-19 pandemic. But the world they’re re-entering is one that’s been fundamentally altered. Over the past two and a half years life has been in fast-forward mode, requiring us all to rapidly change the way we live our lives. We have ingrained new habits in the process, which have led to blurred lines between online and physical, and stability and crisis for consumers.
Today, consumers are acutely aware of the day-to-day risks they face and are also expressing growing uncertainty about the future. A climate like this presents a ripe opportunity for insurers to help consumers build stronger, more resilient lives.
In this post, we’ll explore how insurers can capitalise on this opportunity by calling out 6 key things consumers want from their insurance in 2022.
#1. An insurer they can trust
Trust is the cornerstone of providing effective insurance, the proof that help will be provided when things go wrong. Yet studies consistently show that consumers do not see insurers as trustworthy with half not trusting insurers to meet their basic needs.
For insurers, having an established, familiar brand name is no longer enough to create trust. These days, the way to build trust with consumers is through transparency and equality. It creates a feeling of reciprocity with consumers.
Consumer trust in insurers vs. other sectors [US]
Insurers can make material progress toward building consumer trust in just two practical steps:
- See how every customer experience can be made less interrogative. Identify high-risk consumers and claims using targeted deep dives, instead of subjecting all consumers to the same level of extensive diligence. This creates a better foundation of trust without compromising indemnity control.
- Explore propositions that shift insurance away from managing information asymmetries towards shared value. A focus on prevention, like connected health insurance, has been highly influential in spearheading this mindset shift and reinvigorating trust in the sector.
#2. Covers that they can be confident in
Even though consumers are becoming more aware of the growing risks they face, they don’t show much motivation to address these risks using insurance. This represents a clear barrier that consumers still face in understanding and being confident in finding the right covers for them.
A disconnect has emerged with other sectors: experiences and propositions outside insurance are getting simpler and easier to understand, whilst the insurance sector remains highly reliant on extensive terms and conditions that customers only truly understand at the point of claim.
Moreover, it is proving hard to break this paradigm and simultaneously navigate the regulatory frameworks that govern distribution and conduct risk more broadly. For example, regulatory changes around personal advice have been highly effective in reducing poor conduct across the globe but may have also increased the cost of advice and reduced availability in the process.
Nonetheless, insurers still have several solutions available to increase customer confidence in their covers.
For some insurers, the solution will be to focus on covers with easily understood, pre-defined payouts and triggers. Parametric products and micro-insurance are pioneering these solutions to successfully create new premium pools.
How the COVID-19 pandemic has changed customer needs
For others, the solution may lie in better signposting of what consumers are covered for by using simple digital tools to supplement the key documents. This can make it easier for customers to find the right cover for them under general advice and feel confident before the point of claim.
Embedded insurance offers an opportunity to take this one step further. It provides insurers with a way to seamlessly engage with consumers and address their needs in real-time. Not only does this improve how well information about insurance resonates with consumers, but insurers also benefit directly from the trust halo of the ecosystem they’re embedded in. Together, this increases customer confidence greatly.
#3. Value for money
This one almost goes without saying – consumers expect to pay a reasonable price for their insurance products. But this doesn’t mean insurers have to be the cheapest in order to win. Instead, the focus should be on designing products and retail pricing strategies that factor in customer demand and understand the key parts of their products that consumers are willing to pay for.
Consumer perception of “fairness” of pricing is heavily influenced by what they perceive as “value for money”.
This often comes into play during renewals, because at this point customers count on being rewarded for their loyalty. Insurers are expected to keep this front of mind by both customers and regulators when planning overall pricing strategies because of its considerable impacts.
#4. Delightfully simple experiences
Consumers know insurance can be complex, but when insurance feels unnecessarily complex that’s where a disconnect occurs. But does that matter when the switching rates across most insurance lines are fairly low? The speed at which experience-led disruption has changed the competitive landscape in retail, entertainment and travel suggests that it does.
Digital has played a transformative role across these sectors and is set to be similarly disruptive in insurance too. Now, this does not mean getting rid of the human aspect of customer interactions in insurance completely. Rather, digital interactions will be used to eliminate the frictional experiences and costs across all touchpoints, with personal assistance provided for high-value, high-emotion moments with customers. This can be done through dynamic, personalised journeys that use machine learning to provide a targeted customer experience.
Embedded insurance is leading the way in this drive towards simplicity. It’s replacing generic customer journeys with ones that have been tailored to the major customer segments of each distribution partner and their associated data profiles. All within a framework that readily scales across multiple partners.
#5. Beyond protection
Insurance has always been a way to protect policyholders when things go wrong. And while this has become an integral part of life, it tends to be a “set and forget” experience for most consumers.
The issue particularly hits home for the most valuable customers – those who never claim – who understandably struggle to engage with their insurer.
Over the last 5 years, insurers across the globe have been disrupting this paradigm by moving beyond protection into prevention.
Health insurance, in particular, has been a pioneer of this trend, leveraging wearable technology to transform health insurance into holistic wellness packages. Such propositions are gaining traction across the broader insurance sector, but they remain a fraction of the total premium pool.
However, that is set to change as consumers emerge from the pandemic with heightened appetites for proactively reducing risks instead of just insuring themselves in case something bad happens. This will unlock a new, unmet customer demand that will turbo-charge growth in propositions that go beyond protection.
The result? A transformative win-win opportunity for the sector.
In the short term, preventative propositions will improve margins through associated indemnity savings and better customer retention rates. In the longer term, competition is likely to drive these benefits back to consumers in the form of lower premiums, improving affordability and reducing the protection gap.
#6. Purpose-driven insurance partners
Today, consumers are taking their business to purpose-driven businesses who share their values and are committed to more than just the provision of products and services.
So far, customers have made this shift mostly in sectors with negative ESG credentials, like those with high carbon footprints. But increasingly, they also want to know how the brands they use contribute to a healthier society and environment. And insurers are no exception.
Insurers have been making encouraging progress on this count using their position as major investors in the economy to promote a greener, more sustainable future.
But in other areas, progress has been neutral at best. For example, while greater segmentation and pricing sophistication has improved margins, it has weakened the role of risk pooling, making insurance unaffordable for higher-risk consumers. As an overall sector, there is clearly much further to go in balancing commercial and societal goals.
For most insurers, this will mean extending their services beyond that of a traditional service provider to become a company that is helping to build a more resilient future. This will involve redoubling efforts around environmental goals like net-zero, as well as new programs that develop resilience in local communities, which customers can more readily relate to.
Delivering on all these customer expectations is a daunting prospect. But in a world that has become ‘winner takes all’, the rewards for moving fast will be unparalleled. Insurers need to think carefully about where they focus their efforts, how they can leverage partnerships, and how they can build the capability to proactively address changing customer expectations.
Kanopi is one of the top 50 companies globally, championing embedded insurance and helping insurers every day. We do this by enabling them to overcome the hurdles of legacy infrastructure, integrate with multiple third-party platforms and build seamless user journeys for customers.
Building a strong digital strategy is the first step to success in a highly competitive insurance landscape. Get insights straight from industry experts and leading insurers in Kanopi’s on-demand virtual roundtable: Innovating for resilience