With price comparison sites making customers more price-focused than ever, how can insurers ensure they stand out for other reasons and also improve their retention rates?
A decade after they appeared on the personal lines scene, price comparison sites are still demonised by many industry players for damaging retention levels and encouraging customer churn. But as the aggregator sector matures, is it time for the insurance industry to address some of its issues and learn how to keep hold of customers better?
Post brought together 12 senior industry figures in conjunction with sponsors Pegasystems and Capgemini to discuss how the industry is harnessing technology to build more sustainable business models and see what lessons can be learnt from other industries’ response to the presence of aggregators.
Darrell Sansom, managing director of Axa business insurance, opened the discussion by stating most insurers and brokers would cite “fairly significant retention rates” – although he said this was more the case for commercial than personal lines.
However, he said insurers were not engaging with customers “how they want to engage with us”. He continued: “Industry and digital technology is moving on and, therefore, we need to move on with it and communicate in a digital way, as well as all the other established forms of communication,” he said.
Kevin Holt, client manager at Aon UK, agreed the industry could engage more with customers. “The trouble is, insurance has always been a traditional business, so people look at [how] we’ve done this in the past. Making that quantum leap to do things differently seems to be the barrier to moving forward,” he said.
Tony Tarquini, director of insurance for Europe, the Middle East and Africa at Pegasystems, warned that not all business segments are adopting technology at the same speed, adding that a rush to move to digital for the sake of it could actually alienate some customers.
He commented: “We need to get smarter about that segmentation of the customer, and not just think it’s the right thing to move forward on technology. Let’s understand if that’s what the customer wants. You could move forward too fast. If the customer doesn’t want that, they’ll just move away [to] someone who trades in a different way.”
The discussion then moved onto the question of price and whether insurers could stop customers from being solely price‑driven in an increasingly aggregated and commoditised climate.
The impact of aggregators – particularly in the personal lines space – was blamed for encouraging insurers to compete on price alone, with delegates noting that aggregators have historically given customers no information apart from price, so that becomes their only means of comparison.
However, Go Compare commercial head Anne‑Marie Flexman said her company had worked hard to provide customers with information about service levels and other aspects to help them make informed decisions on the most suitable cover for them, and said customers were not as price‑driven as many imagined.
Flexman claimed the most successful businesses are those that have a very clear view of the segments they are looking to attract and do not view every customer as the same, adding: “That applies equally in the personal lines world and the commercial world, and obviously looking at how you segment. [Ensuring] you’re tailoring the right products is key.”
Kevin Aubrey, head of commercial distribution at LV, said the insurance industry is partly to blame for fuelling a fixation on price because companies are not good at differentiating themselves based on other metrics: “We all accept you need to be price proximate but we could be better as an industry at being able to differentiate our product and service. Hand in hand with that is probing and asking questions about [the customer’s] needs, but also [recognising] the fact that risk appetite varies. Often we’re victims of ourselves because we don’t do the non‑price differentiation well enough.”
Suzanna Shaw, customer experience lead at RSA, said that to improve customer retention the industry must work harder to create “sticky” relationships – which she said depend largely on trust. “You’ve got to make sure your characteristics are ones of integrity and you do what you say you’re going to do. But then you’ve got [to have] the capability [to deliver]. You can’t have one without the other or it falls down.”
Steve Humphrey, head of business performance at Insure The Box, highlighted that a major problem for many within personal lines is the fact that customers’ interactions with insurers are limited to the point of sale and renewal, unless they have to make a claim. However, he noted his firm’s experience is different because of its use of telematics data.
“We’ve got the black box [so] we provide feedback on the driving. We’ve got the social media aspect to it as well, where we engage with our customers. We have to fulfil the promise of the claims as well but, in order to get that customer retention, we have to give them something that’s going to add value. Otherwise they will just go somewhere else,” he said.
Aubrey echoed this sentiment, saying that while there is no avoiding the fact that price is a key motivation, “if you win on price, you’re going to lose it on price, unless during the time you’ve got the customer, you interact with them in a way that adds some value”.
He added: “It might be that you’ve segmented them into a certain manufacturing sector and there’s some risk management you [offer to] add value to that client. The key then is how you keep that momentum going to build loyalty.”
While the presence of aggregators has been challenging, insurers have been more defeatist than other sectors, suggested Capgemini head of solutions and propositions Keith Aylwin. “If you look at the airlines, they’ve all been competing around brand and proposition and finding their niche. A lot of personal lines insurers seem to have [said] ‘it’s just a price play’ and haven’t really focused on things [such as] how they service customers and how they add value to them. I’m not sure why that is; whether it’s the technology or whether it’s the culture.”
Along with facing internal pressure to improve retention, there are also external drivers for altering behaviour towards customers, particularly from regulators including the Financial Conduct Authority, Sansom said. “We’re having this price debate but the FCA isn’t focused on great price outcomes, [it’s focused] on great customer outcomes,” he commented.
Citing telematics models used by Insure The Box and others, Sansom said data enrichment could be used to improve the customer experience, but lamented the fact that this tool is not being harnessed widely. “I hear far too much [about how] data enrichment could [be used to] modify price. As an industry, we go back to price again. We don’t say, ‘What do I now know about the customer that allows me to fulfil their needs better?’”
Holt said the industry needs to get better at publicising good claims service, adding that collating customer feedback is a key tool in that respect: “Aviva has started to do some of this on one of its websites and that’s an incredibly good thing, because there is no stronger message than ‘I had a claim, and I was really happy with that insurer.’ That’s the best way to get retention.
“The best way to lose a customer is for them to have a bad experience. But we don’t look at the feedback. In the commercial space we’re better at it. We look at the insurers [and] we do a willingness‑to‑pay survey, and that will influence where we place business with insurers.”
Sansom said the manner of selling insurance – which is often to try to “flog” a product rather than spending time listening to the customer – is also to blame for poor retention levels.
“We spend too much time on the solution and not enough time on the diagnoses,” he said. “What you’re selling should be a consequence of having a better conversation up front. The balance is tipping a little bit, which is forcing a greater agenda on the front to get the back‑end agenda right. And that leads to greater longevity.”
Joe Murphy, managing director of Arthur J Gallagher Housing, said the approach of sales staff is very important in this respect. “Dealing with commercial first, if we’ve got more than a transactional relationship with an organisation, we don’t want our main contact to feel that every time the sales guy comes in he is there to sell them stuff. There is a process of selling, but it should be far more subtle and obviously should be about the client’s needs,” he said.
“In the personal lines space, as a potential customer, it is very aggravating when you try to buy something and [the firm tries to sell you an add‑on], and you make it quite clear why you’re not suitable for it, and you still get the same story; as opposed to [firms that] do it well, accept the facts and say, ‘No, fair enough, that wouldn’t be for you,’ and they move on. Across both spaces, the sales skills can often be improved.”
Another key area, according to Shaw, is understanding the level of indemnity the customer desires at the point of purchase. This is often easier in commercial lines than personal, as the customer is not always aware themselves, she said.
Delegates agreed transparency is key and that insurers could be better at explaining clearly what will and won’t be covered under a policy. Holt suggested policy documents could be significantly simplified: “Why not [stop having] a policy document? Just have a thing saying, ‘In these circumstances, you won’t get paid for this, this and this, and everything else you’ll get paid for.’”
However, some questioned whether this level of simplification was viable. Anna‑Marie Powell, marketing director for broking and underwriting at Towergate, said much depends on “if you’re a confident buyer and you know what you’re looking for”.
She added: “I’m a landlord and I bought landlord insurance online, but I cancelled it after a year because I wasn’t sure if it actually covered this particular thing. I then went through a broker because they could explain it all to me, whereas I’d gone to a call centre and they couldn’t explain this specific area of cover to me. I wasn’t 100% convinced they knew what I was asking.”
While ensuring customers buy a suitable policy in the first place is important, the key to retention in an increasingly digitised world is still forging a relationship, according to Alison Barlow, head of marketing at NIG. “When it does come to renewal, if you’ve not heard of or had any contact with either your broker or insurer, why should you stay?
“But if you’ve had one or two emails where you feel that at least you’ve got a bit more connection, [you might] look to go with them again. Even if you have [checked] a comparison site, if you’ve seen them in the list and they’re recommending a product that sounds good, perhaps you’ll think, ‘I did go with them before [and] I’ll do that again.’
“Moving forward as an industry, that’s what we need to do. And the different digital channels help you talk more to the customer, so hopefully at renewal stage it’s not a question of ‘let’s move around with price’, because you’ve just got more of a connection with that particular brand.”
While new social media tools provide different platforms to interact with the customer, older tools such as email can still be utilised very effectively, Robin Pegg, senior marketing manager for Covéa, suggested.
Citing the example of his university‑age son, he said: “He lives in a street which has quite a high incidence of break‑ins because they’re students. They also lose laptops. And when they lose laptops they lose all the data that goes with it.
“[Insurers could send] a regular email reminder to say ‘make sure you’ve done your backups’ or ‘be aware that these are the kinds of things people are stealing in your street’ ‑ interacting like that with an age demographic which is saying, ‘Well, my dad’s taken care of that. I don’t have to worry about it.’ There are a whole series of opportunities there to interact with my son that are just not being taken.”
Ultimately, whether customers are in the high‑net‑worth space or simply buying highly commoditised cover like home or motor, they want to feel they are being treated as an individual, regardless of the platform used to engage with them, Pegg concluded.
“Human nature says we all want to feel important. So, as an individual buyer of a personal lines product, I want to have that choice and the personal experience. It’s human nature. It’s about making the individual feel important no matter where the relationship is.”
- Zurich settles two claims from Westminster terror attacks
- ERS owners explore potential sale
- Amanda Blanc makes first appearance as ABI chair
- Over 20 start-ups pledge support for proposed insurtech trade body
- Co-op hits out at software viability in IBM legal dispute
- CBL broker EISL stages management buyout
- Insurance firm director jailed for 31 false claims and Manchester Arena terror attack fraud