In my previous post I made the point that consumers worldwide have woken up to the fact that they need to increase their retirement investment, but that life insurers are not benefitting to the extent they would have hoped.
What has caused insurers to slip in consumers’ rankings of preferred financial advisors and guardians of their retirement investments? I believe there are five key factors:
- Erosion of trust. Confidence in financial institutions was declining even before the 2007-2008 economic crisis, at which point it plummeted. The Cyprus banking collapse had a clear message: there is no such thing as money; it’s all a confidence game. A succession of consumer surveys has shown that many people have more faith in individuals and communities than in corporations, and are more dependent on the “wisdom of crowds” than of so-called experts.
- A perceptual disconnect. Even today, most financial organizations are enterprise-centric. Everything from their structure to their prospecting is based on the question: “Who will buy my product?” Consumers, however, don’t care about products. What they do care about is their lifestyle and their needs—their well-being and their happiness. Few insurers have made the transformation from product- or enterprise-centricity to human-centricity. They haven’t managed to elevate their engagement with their customers to address their higher-order needs. Until they do, they will struggle to interact in an effective way.
- Low awareness. Our research clearly shows that insurers have done a poor job of reaching consumers, persuading them that they have the answer to their retirement needs, informing them of their options and advising them on their best course of action. Is it surprising that, when a life-changing event occurs, hardly anyone thinks: “I wonder what my insurance advisor will say about this?”
- Rising expectations. Many insurers still think consumers, who eagerly embrace every new technological innovation that makes their lives easier, faster and more interesting, will be satisfied with a 20th century engagement model. They won’t.
- New offerings. A new breed of financial services start-ups are not only engaging with consumers across the channels they prefer and in a dialog that is meaningful to them. What’s more, they are introducing a brand new set of services, many of which address customers’ needs in novel and compelling ways.
Most of these new firms are unproven, and many will surely fail. But they do show a recognition that consumers want to be approached differently than before, with solutions that are more relevant to their concerns. Insurers that fail to see they have fallen out of step with their customers are in grave danger of becoming irrelevant.
In my next blog post I’ll chat about the need for transformation—and why it’s so unpopular.