In my last blog I introduced the concept of the switching economy. Simple logic tells us that customers are mostly going to switch insurance providers because they are dissatisfied with the service or product they have been receiving. Of course price is always a factor in any commercial transaction, and it’s always the easiest way to articulate dissatisfaction.
But, as I know from my own experience, switching any kind of insurance is not the single click journalists love to talk about—that’s only really possible for the minority of simple products like, for example, automotive and small-ticket insurance. When it comes to household insurance, there is a lot new information to be inputted for one thing: Just how many square meters is your house? What’s your household crockery worth? In life insurance, with its long investment horizons and need for a physical examination, switching providers is even harder.
So while price is one factor, perhaps among the most important, there’s more to any switching decision. This view is supported by the 2013 Global Consumer Pulse research, which shows that, across all industries, companies could have done something to prevent customers from switching. Other findings appear to suggest that while poor customer experience plays a major role in the decision to leave one provider, the choice of the new one is still hugely influenced by price.
In other words, price seems to play more of a role in choosing a provider, while customer service is important in retaining customers and persuading them not to switch. And indeed as the Customer-Driven Innovation survey indicates, 80 percent of existing insurance customers see a lack of personalized service as an important trigger in deciding to switch to another provider. These findings highlight some of the key characteristics of the behavior of new “non-stop customers”:
- They are more likely to shop around.
- They increasingly seek advice and guidance from friends and family, and online word-of-mouth is also an increasingly important source for information.
- They are demanding more convenience and self-service.
- They want greater personalization and tailored offerings.
- They are constantly evaluating products/services (and their delivery) against what was promised at the time of purchase.
In this regard, it’s extremely significant that insurers worldwide have failed to notch up any significant improvement in any of the important customer metrics over the past four years. (These metrics are satisfaction, propensity to recommend to others, loyalty and readiness to buy more.)
Our view at Accenture is that this situation can probably be attributed to the fact that most companies—not just insurers—have adopted defensive positions over the past few years, perhaps in response to the financial crisis. What’s increasingly clear, I would argue, is that the time for the “safe play” has passed, and companies need to take vigorous action to retain their existing customers, position themselves to attract those that are switching—and get new business too.
It’s time, in fact, to play to win.
Next week, I propose to look more deeply into the multiplicity of factors driving the switching economy centered on the emergence of the digital customer.
Download the Customer-Driven Innovation survey report.