The rise of the insurance ecosystem

By Rikard af Sandeberg, Director, Product Management & Marketing Nordics

Insurance companies notoriously struggle to keep customers loyal and engaged. It’s an industry often associated with low customer satisfaction; according to research by Deloitte, 51 per cent of consumers will switch providers if they’re dissatisfied with how insurers deal with a claim.

Insurance policies are also often perceived as a boring, but necessary, part of everyday life that provides peace of mind, but not exactly a choice that thrills the consumer. The fundamental challenge insurers face is they are operating in a highly commoditised market, making it extremely difficult to differentiate. This is why consumers often make their decision purely based on the difference in price, and the proliferation of price comparison websites has done nothing to discourage this.

Also at the heart of the problem is the low-touch nature of the customer/provider relationship.  Generally, a customer will only get in contact with their provider if they want to renew (or cancel) their policy, or when they need to make a claim – which is often a time of crisis for the consumer. The dominance of aggregator websites also means insurers are often one step removed from their customers, making it difficult to establish a direct relationship.

A new dawn for insurers

But change is on the horizon. According to Bain & Company’s global research Customer Behaviour and Loyalty in Insurance, insurers are working hard to change customers’ perception of them, and are increasingly striving to expand their offerings to become a more important and valued part of their lives.

This is being achieved through placing themselves at the centre of an ‘ecosystem’; an interconnected network of services that includes non-insurance offerings such as smoke, intrusion and leakage monitors for home, health diagnostics and advice, and telematics sensors for vehicles that can be used to trigger maintenance alerts.

Crucially, these services are an extension of insurers’ core remits; they offer peace of mind, reassurance, protection and support to consumers in important areas of their lives. Bain’s view is that “no longer merely isolated providers of a low-touch product, insurers can become the key players in ecosystems of interconnected services for home, auto, health and life”.

For insurers, the benefits are two-fold. Firstly, building an ecosystem helps them to find a much-needed point of differentiation, and move from the provision of a specific service – such as house insurance – to a role in which they add value in multiple areas of the customers’ lives.

Secondly, this expanded reach enables insurers to engage with their customers through more touchpoints, and creates more genuine and valuable opportunities to contact them and build an ongoing dialogue. Ultimately, this has the potential to make insurers a larger, and more, valuable part of their lives – increasing the chances of customers staying loyal.

The positive impact of extending in to new areas of customers’ lives is clear. Bain’s survey demonstrates that where insurers concentrate on building loyalty they can gain considerable ground – as much as 20 percentage points in Net Promoter Scores over a three-year period.

Personalisation key to greater loyalty

But to improve loyalty levels, insurers must offer customers the personalised service which is expected in today’s digital environment. The challenge for providers is they have notoriously found personalisation via digital channels difficult, because of the low-touch nature which limits the amount of data they can collate, and build insight from. Aggregator sites also restrict the level of direct access to consumers’ online journeys, meaning opportunities to collect data and personalise future journey are missed.

This is supported by Bain’s research, which highlights that customers who use exclusively digital channels score insurers lower compared to in-person or phone contact. In contrast, customers who use more channels – for example contact centres – tend to score insurers higher, as the provider is able to demonstrate an understanding of the customer across every touchpoint.

The creation of an ecosystem holds the potential to boost loyalty by opening up more channels of communication – in particular digital channels. This provides the ability to collate more data – resulting in greater personalisation.

The missing piece of the puzzle

But amongst the many areas already included within the ecosystem, there is a huge opportunity that is being missed. In today’s digital age, it’s crucial that this model expands to include cyber services that help customers to protect their online identities and privacy.

We manage our lives supported by multiple devices, and share more personal information than ever before across social media, e-commerce and the web, so the risk of sophisticated fraudsters taking advantage is never far away. With high-profile cybercrime breaches hitting the headlines every day, consumers are only too aware of the potential threat. Research by Norton reveals that more people believe it has become harder to stay safe online in the past five years (63%) than in the “real” world (52%).

The ecosystem should evolve beyond the traditional remit of insurers – the protection of tangible, physical possessions – to offer services which prevent against, and detect the signs of suspicious online activity. For example, social media and dark web scanning, that can detect if the customer’s data has been shared or compromised in any way before it causes a serious issue.

And, if the worst was to happen, insurers should embrace their role as ‘protectors’ and support customers to resolve the issue. This could be achieved in a number of ways, for example, in the form of an ID/cyber helpline, legal assistance, a ‘clean up’ service that deletes or blocks compromised personal information,  or even cyber fraud insurance, a topic that’s been high on the industry’s agenda for some years now.

This holistic support system, from detection to resolution, holds huge potential for insurers to become a more relevant and important part of their customers’ everyday lives – not just a number to call to complain, claim or renew a policy.

Time for change

The insurance industry has reached a pivotal point in its journey and providers are realising there is an untapped opportunity to diversify and offer services that address broader consumer needs. With customers quick to change providers if they find a cheaper option – or after a bad experience – it’s crucial that insurers find a positive point of difference from the crowd.

Whilst driving, financial planning and home security initiatives are already at the forefront of this ecosystem, to truly future proof their offerings and remain relevant. Insurers must bring cyber protection into the fold and provide their customers with what they most desire from their providers: peace of mind.