Intensifying competition and evolving consumer behaviors will have important implications for insurance providers in the Australian market. In addition to slower growth and reduced profitability, our research finds that insurers can expect to be affected in at least five different ways.
Mass-market offerings will become less relevant
Consumers are responding positively to the concept of more tailored or customized products or offerings. This fact is confirmed by a finding I revealed in my last post —63 percent of respondents said they’d be interested in a motor insurance product that bases the cost of their premiums on their actual driving behavior. The chart below shows some of the other products consumers would be interested in:
Multi-channel distribution will be critical
Consumers expect to be able to interact with companies, manage their accounts and make purchases when, where and how they want—and that includes when they are buying insurance. While many insurance purchases are still made by telephone in Australia, consumers are beginning their journey online.
Customer churn will rise as loyalty falls
As Part One in this blog series revealed, consumers are more likely to shop around for quotes before making decisions. Since the switching costs associated with personal lines products are low, there are very few barriers to increased churn.
Cost of doing business will increase
As customer churn increases, a higher proportion of the customer base will need to be replaced each year. The battle for market share starts with a fight for market awareness. Insurers will need to seek alternative media and better customer targeting to meet the evolving needs of Australian consumers.
Data will be a competitive weapon
Insurers can gain a wealth of insights by applying advanced capabilities to mobile, online and third-party data. These insights will help them target potential customers and service existing ones more effectively.
There is no doubt that challenging times await Australian insurers. Those insurers that prepare now will be poised to outperform their competitors, but they’ll need to focus on several key areas. In my next post, I’ll conclude this series by looking at the steps insurers can take to ready themselves for the storm ahead.
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