Ireland’s insurers must change to meet new consumer demands
Ireland’s insurers are at a crossroads. The country’s status as a global digital hub notwithstanding, they’ve yet to take real advantage of technology advances to meet modern consumers’ needs. The consequence? Without change, they risk irrelevance. In this blog series, I’ll be looking at what Irish consumers want, how well (or badly) insurers are meeting those demands and what they can do about it.
A number of factors are coming together to increase the pressure for change. First, the government is beginning to intervene in the industry: the ‘Cost of Insurance Working Group’ report earlier this year is a case in point. Without some action by insurers, further intervention will follow.
Meanwhile, InsurTechs are challenging traditional distribution channels, using digital savvy to upend areas of the customer value proposition (like personalisation). According to our recent report on the future of insurance distribution,their influence will only grow: two-thirds of all VC funding in insurance now goes into distribution startups. How long until Trov, the on-demand, micro-duration insurer, decides to target the Irish market? Having launched in May 2016 in Australia, it opened for business in the UK in November and recently secured an additional US$45 million, announcing plans for further expansion
Crucially too, new ‘liquid’ expectations are a fact of life. Having experienced convenient, customised, on-demand services from other providers, consumers are bringing the same expectations to insurance. They want new ways to manage risk and purchase products and services. And if insurers do nothing, startups will plug that gap.
This is not meant to sound inflammatory, but there’s a real risk that the distribution model will shift and it will not be current insurers that decide the direction of that shift. Let’s take a closer look at what insurance customers are looking for from their insurers. Drawing on a recent Accenture consumer survey (which canvassed almost 33,000 insurance consumers across 18 markets), we can zoom in on the Irish market.
Here, as elsewhere, insurance is seen as a grudge purchase, and consumers continue to be mistrustful of the industry. In other words, it’s a challenging environment.
Where they do engage with the industry, 62 percent of Irish consumers say ‘competitive pricing’ (low cost) is among the top three factors that makes them want to stay with/continue using an insurer, with ‘value for money’ also scoring highly on this measure.
Additional factors like high-quality customer service and trust surrounding personal data were also important (the GDPR…a blog for another day). But price is the clear winner. Bearing in mind the huge amount of media interest in rising premiums, it’s no surprise.
The problem? In a commoditised marketplace, with their profitability under unprecedented pressure, it’s tough for insurers to compete on price. They have to find other ways to stand out. The priority? Identify new opportunities to engage with consumers across the insurance lifecycle and use advanced technologies like AI and IoT to realise them.
Our research points to major rewards for insurers that get this right. Forty-eight percent of Irish consumers say they’d like to receive products and services from their insurer that are more relationship/advice-based, rather than basic transactional products. Fifty percent of them are ready to share more personal information with their insurer in return for certain added benefits and a more personalised, relevant service.
For the moment, however, insurers lag a long way behind banks when it comes to harnessing digital to engage with the market. It’s a missed opportunity. Almost 90 percent of Irish consumers would like to use an online/digital channel to find information on insurance products; 67 percent would like to use an online/digital channel to purchase insurance products. And remember, these digital channels aren’t limited to regular websites and mobile apps. They also include email, instant messaging and video chats.
From what I see, the insurance industry here has been relentlessly focused on cost reduction and improving internal operations – that’s understandable given market context. However, as a result, this means that up to now there’s been little emphasis on engaging with customers.
But there are now signs that leading firms are lifting their gaze and targeting growth. Customer engagement will be the battleground of the future in achieving these ambitions.
In my next blog, I’ll look at how Irish insurers stack up against the new consumer expectations.