The insurance sector must remain vigilant to challengers, be they data giants like Google and Amazon, or nimble insurtechs. Especially given that some already hold such rich data. So how can incumbents take on potential usurpers? Is now the time to take a more imaginative customer-centric approach? A recent roundtable organised by Post, in association with SAP, and its partner MSG, sought to tap into current thinking from a wide cross-section of insurance specialists
Is it time to diversify revenue streams and offer customers added value service propositions outside of insurance?
Robin Stagg: Yes, but first we need to tackle the elephant in the room, which is selling on price and that affects personal lines in particular – it’s been going on for far too long.
Nick Whitnell: I’d agree, but we also need to remember customers buy from brands they know and love and this produces trust. It’s securing customers’ trust that we must focus on.
Justine Dignall: It’s less about taking products to market than working out what issues customers face and then developing solutions around this – if we do this properly, we should then be able to wrap insurance around these additional benefits and services.
Glen Clarke: We need to diversify but my concern is that as we become more commoditised in terms of product and pricing, as well as having chatbots providing the servicing, then we are in a race to the bottom. It’s critical customers have choice and that we give it to them. I’d like to see more doing things differently, rather than just following what’s already happening.
Sam Jordan: There’s scope to do more and price is not the only issue. As specialists in car excess insurance our product is cheaper than that offered by rental firms. Trust also means making customers feel like they are an individual. You can offer a chat facility but also have someone at the end of the phone. It’s about having the conversation about issues that affect customers so you are seen as the trusted source.
Nick Hartley: We need to realise things are not black and white and offer what customers want. Some millennials may not want to speak to an agent, while others will need advice. There are different solutions for different people.
John Pyall: It’s not straightforward - we can’t just say it’s younger people who won’t want to speak to someone. It’s older people who often don’t want to pick up the phone and will buy online with greater confidence, because they’ve already had claims experience and they know their way around the market. Generally, once you’ve had cover for a year or so, people then tend to jump in with a digital proposition.
If there is going to be more diversification, how should insurers improve their service?
Hartley: Be available. I ordered a MacBook from Amazon a couple of years ago, which came in about 12 hours. But getting to speak to someone from my insurer to add it on to my policy took about two weeks because they were either not open or I was working. It’s also common to charge admin fees – typically around £25 for a midterm adjustment - this shows how far apart the insurance sector is from some digital retailers.
Pyall: There has been progress with digital propositions and the classic example is Trōv, where the customer photographs the item and the receipt, adds it online and it’s done directly. It’s in this sort of space a company like Amazon would want to operate.
Charlie Platt: There’s a need for new thinking – insurers may be using chatbots more, for example, but many others are doing the same thing. Insurers need to be thinking about how they can change their positioning and actually do things better – that could mean disrupting their supply chains.
Tony Capper: I’d agree while there are digital advances, some of the large insurers are not doing enough to make it easy for customers. With my daughters now at secondary school, we have a growing amount of tech at home, but adding things onto a policy is not a quick process – equally it’s time consuming making claims. Banks are now allowing people to block and unblock credit cards – we need much quicker processes for insurance.
We’ve talked about the importance of trust, do insurers need to rebuild this?
Steve Burns: Trust is largely linked to helping and communicating with your customers and a lot comes down to education. In niche areas this can be useful and we focus on landlords and cosmetic practitioners. We offer both free and paid for seminars and conferences to help them know more about risk, how to make a claim and most importantly, how to avoid having one. We’re more expensive compared to some in the market but even when clients leave, they often come back because of the support we provide.
Jordan: We use Trustpilot on every claim and it’s really effective – this is an easy way to build trust and if you’re providing a good service, there is no reason to hide.
Pyall: There’s going to be more opportunity for a relationships with customers through developments like Aviva’s Drive app – this clearly has a role in helping prevent claims, but it’s probably even more valuable as a marketing tool. Insurers can now interact regularly with their customers.
Better service is one element, but what about growing revenue?
Hartley: You should be able to build a suite of products or services that have insurance built around them – the key to getting this right is stepping into the customer’s shoes and seeing what they need. Often there is a legislative need for insurance, but if we get things right, we could go a lot further.
Platt: One key thing to think about is getting different divisions working together before new products are launched. Many insurers have individual lines with their own profit and loss accounts and it’s a barrier to development. If you look at a business like Uber, it’s a mash-up of different elements – there needs to be more collaboration.
Pyall: There are opportunities in creating products for those wanting switch on and off cover. Theoretically, it can be cheaper to buy annual cover, but paying say a charge of £15 for hours worked when driving, may appear to be better value than paying say £400 for a yearly policy. Offering this type of cover could well be profitable.
Clarke: There are a lot of nuances with the gig economy and there needs to be smarter thinking. I think there will also be scope to offer customers services where we save them time and money, such as in helping them with areas like finding the best energy tariff, things that make life easier alongside providing insurance.
Is there a lot of opportunity already sitting in supply chains?
Melissa Boyars: Absolutely and looking at commercial insurance, we could engage more with customers to help increase their understanding about identifying risks and in loss mitigation. And if you want to do it well, then you need to put a lot of work into partnering with the right specialists.
Pyall: The internet of things is going to be relevant in this area – with some commercial policies, there is already the scope to help with escape of water by being able to switch off the supply.
Clarke: There are already home emergency products but we can go further - the problem at present with doing this on a mass market scale is that the costs may be too high to make this feasible. In the future, however, we may work with more partnerships where we’ll be sharing customers. And if we do that we’ll need to offer choice – no-one wants hand-cuffs.
Dignall: There is certainly scope to do more with services outside of insurance. We specialise in the care sector and we have a team of senior practitioners who visit customers and help with pre audit work. This is incredibly well received as it’s about making a difference and can help businesses achieve glowing inspections, for example. What’s important is having the right knowledge base.
Whitnell: There are certainly ways we can bring more value to customers and this is going to also help build relationships – one example of a product is [the smart doorbell] Ring – this boosts security and so also benefits the insurer.
Does working in closer partnership with others also mean potential reputation problems?
Barnes: It can and from our perspective, we ended up buying companies we were working with – meaning we now have expertise in areas like deposit and client protection and property redress in-house. It works well, but you also need to make sure your existing staff understand how to work together.
Hartley: In a previous role, I was in high net worth and we had to outsource claims in two areas – pet and travel. This is where we found there were most pain points. So, if someone broke their leg abroad while skiing, we had to rely on another partner to bring them home. It is difficult and delegated authority is going to be preferable if not always possible.
Pyall: A frustration for me is that working with suppliers has historically meant trying to get their services for less – so an insurer would insist on having 15% off the service provided and then we wonder why there are issues. Look at loss adjusting – this has been dumbed down and paying less means less expertise.
Dignall: I agree – we need to embrace innovation and new ways of working but if you start taking out cost too much you will end up with a substandard proposition.
Stagg: There’s a lot of talk about value added services, but they actually have to mean something. Simply offering data-driven risk management is unlikely to go far enough. There is no point just tacking on a widget – you need to be brave. We need to get more insight into how customers are living and build new propositions with partners if necessary from the ground up.
Jordan: I’d agree we need to look at behaviours and offer more flexible and appropriate products – so for us, that means reaching out to those that may not be hiring a car, but are travelling and also the growth of the independent traveller – it’s about creating products that suit different generations.
Platt: There is also a mind-set issue – insurers should look at the banking experience with Payment Service Directive 2 and the arrival of open banking – some have been very positive about data sharing opportunities, others haven’t. Comparisons matter and while I tend to buy some items from John Lewis because they offer a two year warranty, increasingly, we’re going to be getting more insight into whether something really is a good product.
Boyars: Data is going to become more important here, but insurers must make sure transparency is at the forefront.
Is the insurance sector being held back by regulation?
Pyall: Yes, it’s a nightmare, we are having to give customers around 10 pages of material. Now there are insurance product information documents and this is on top of a certificate, policy document, schedule and probably a terms of business agreement.
Jordan: On IPIDS, we looked a number of other providers and found they were not compliant – it is all very well us doing the work but we then are at a disadvantage if others don’t comply and there is no enforcement.
Clarke: There is also the General Data Protection Regulation effect and it can limit the amount of data you can take and so be inhibiting.
So, do you think that you can really challenge the digital giants?
Capper: There are certainly opportunities but looking at Amazon, it monetises every transaction and it is also a broker – this is not necessarily going to be possible for insurers.
Stagg: The biggest challenge will be for the aggregators. They have not really managed to communicate with their customers and are on the stickiest wicket.
Pyall: I can see use of aggregators dropping over the next five years. The other issue is that some of the new digital insurers may also fail. I read Lemonade’s loss ratios are significantly behind where they want to be. Amazon may be massive but they are still more likely to want to work as a broker as they do in retailing. Look at Tesco insurance – it’s actually Ageas.
Hartley: Insurers do need to come up with different business models – I’m a big fan of looking at other industries as we can learn from them. These external pressures will make us think more and could be the kick the whole insurance industry needs. And on Lemonade, yes they may not survive, but also the fact they give 25% to a charity if you don’t claim is a positive move in terms of corporate social responsibility – we can take new ideas on board.
Boyars: I’m positive, we have the expertise and scale and the current environment presents opportunities.
Clarke: I would still question if companies that are not existing insurers would want to be involved with complex lines?
Stagg: I wouldn’t be too sure – there can be bigger margins in more complex areas and they are interested in margin – they are also smart operators.
Pyall: We know that Direct Line did not bring the end of the brokers. There is also a message for all of us here - we need to adapt to survive.