Jon Cano-Lopez, CEO at REaD Group
Last week, the FCA gave the green light for a new set of rules designed to address concerns around customer engagement and transparency in the insurance sector. From April 2017, insurance firms will be required to contact customers before each renewal date, disclosing their previous year’s premium, and encouraging them to check their cover and shop around for the best deal.
It’s a sorry state of affairs when the powers that be are forced to facilitate communication between businesses and their customers, and a wonder how customer engagement in the insurance sector has deteriorated to this point. Then again, you don’t have to look far to find the root cause of the problem. Whether it’s an obnoxious opera singer or an over privileged meerkat, the reason things have become so bad is plastered all over our TV screens.
Price comparison sites have disrupted the insurance sector to the point that the relationship between insurance brands and their consumers is near-on over. What was once an industry commonly buffered by trusted advisors is now at the mercy of intermediaries that relentlessly encourage consumers to shop around for a better deal.
Inevitably, commoditisation and the rise of the switch-happy consumer have posed a significant challenge for customer retention in the insurance sector. But underhand tactics and auto-renewals are by no means an effective solution. Insurers need to work on building profitable relationships with consumers through openness, relevancy and transparency, and it’s going to take more than a letter in the post once a year to achieve.
As a starting point, insurers should consider what aggregators did differently to win over the consumer in the first place. Aside from making the process of buying insurance easy and simple to compare prices and features, they completely changed the industry into a price-driven market. All the while, insurance brands were slowly losing sight of customer engagement and becoming little more than logos against competing costs. It’s time insurers turn the situation around if they want to claw back their customers. Insurers need to become customer-centric, not product-centric, and offer a solution that is right for the individual. Insurance brands must get as close to the customer as possible.
The good news is there is an enormous opportunity for insurers to offer long-term value which aggregators simply cannot provide. They can do this by turning their traditional policy centric model on its head and completely reconsidering the way they communicate with consumers. Focusing on their customers as individual people, insurers should pursue relevant and timely contact – the right message, at the right time – and offer a more personal service that serves their needs, as they grow as a customer through their life.
Rather than delivering a one-size fits all model, insurers must consider the individual insurance needs of consumers and seek to fulfill these with tailored policies and pricing. They need to consider the individual first, and only then can they consider their insurance needs. They must offer consumers a long-term solution dependent on who they are, their life stages, and their needs as they grow up. In doing this, they can start to establish themselves as a partner, a trusted advisor, and give consumers a reason to renew each year beyond price. To have the best relationship with the customer, the insurer needs to keep close. Treat them right and the lifetime value of that customer will only increase.
Now is the time to take back control of customer relationships, cut out the middle man and deal direct. Aggregators have undoubtedly created a promiscuous consumer but the onus is on insurers to change this. With the right data, insurers can develop a new kind of intelligent service that consumers will want to buy into, and most importantly, will deliver long term value for both insurers and their customers.