Incumbent insurers fall short of delivering the value that consumers, especially millennials, expect. This is according to Bain & Company's fourth insurance loyalty report, which found the industry vulnerable to disruption from insurgents unless it can deliver on what matters most to customers.
The most important elements for today’s property & casualty (P&C) and life insurance customers are functional ones such as those related to ‘quality’ of products and services and ‘ease’ of doing business.
Yet most incumbent insurers are not delivering on these fundamental preferences, let alone higher order traits. Only 20% of Millennials in the US give their P&C providers high scores for the key elements that matter most to them, such as ‘motivation’ and ‘affiliation’.
As a result, consumers around the world – particularly those who are young and digitally active – want to do business with new entrants that are capable of creating and delivering more value than incumbent insurers.
In the report, ‘Customers Know What They Want. Are Insurers Listening?’, Bain & Company canvassed more than 174,000 retail insurance customers in 18 countries to understand what they expect from their insurance providers and the qualities they value most in an insurer.
These qualities are based on the Elements of Value – 30 fundamental attributes identified by Bain & Company that help companies gain an edge with customers.
Darci Darnell, global head of Bain & Company’s Customer Strategy & Marketing practice and the report’s co-author, said: “Insurance customers don’t have complicated needs. They want to be able to choose from a good selection of policies at reasonable prices. They want clear, transparent information, and they want smooth, hassle-free interactions. They expect their insurers to help alleviate their anxiety, not add to it. But the harsh reality is that most insurance companies still don’t consistently deliver the value their customers are seeking.”
As a result, the industry is increasingly vulnerable to digital innovators that sell directly to consumers and bypass established companies by creating more value for their customers.
Survey findings reveal that consumers – especially digitally active Millennials – are very open to purchasing from new entrants, including those from outside the industry, such as tech companies, automakers, and retailers.
This trend is most evident in emerging markets such as Thailand, Indonesia, Mexico and Brazil, where approximately 90% of respondents said they would be open to purchasing insurance from new entrants. Among Millennials, that number jumps to more than 95%.
However, even for new entrants, it is anything but a given to outperform the incumbents on critical elements. In the US, for example, Lemonade, a digital-first company launched in 2016 that provides low-cost insurance to homeowners and renters, is the rare example of a new entrant that has outperformed on the key dimensions that matter to consumers – helping it attract and retain customers.
Further, Bain & Company’s research shows customers give insurers higher Elements of Value ratings when companies offer an ecosystem of services that go beyond simple insurance coverage. These insurers are able to better connect with consumers on emotional and life-changing elements – those prized by Millennials.
Across markets, more than 80% of customers are open to, or actively interested in, an ecosystem of services. In many countries, a majority of customers would even prefer insurers to provide these ecosystem services.
Dr Henrik Naujoks, head of Bain & Company’s Financial Services practice in Europe, the Middle East and Africa, and co-author of the report, said: “In a time of disruption, the smartest insurers recognise they can’t do everything on their own. They’re teaming up with Insurtechs and other companies to modernise their operations, from distribution to claims processing.
“Insurers that do the hard work of understanding and delivering the Elements of Value that matter most to today’s and tomorrow’s customers can put themselves on a path to sustained loyalty and lasting growth,” he added.
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