Would people buy more insurance simply on the back of an improved ease of use? As a practitioner out on the field, you instinctively know the answer is 'no'. Whether you are an adviser or an agency leader looking to grow your team, here's a survey by international think tank of the insurance industry The Geneva Association for statistics to back you up.
In this excerpt of ‘Underinsurance in mature economies - reasons and remedies’ by Dr Kai-Uwe Schanz, Senior Adviser and Director Socio-Economic Resilience with The Geneva Association, a global customer survey with 7,000 participants found that:
Interestingly, and in contrast to some other polls, the sheer ease and simplicity of buying and transacting insurance is not a relevant factor which, on its own, would encourage additional insurance demand.
Just 15% of those interviewed on behalf of The Geneva Association would buy more insurance simply on the back of an improved ease of use. At a share of 20%, the millennials are no exception.
The survey suggests that the future of insurance distribution will remain omnichannel. Agency networks are here to stay as 55% of the interviewees name them as their preferred channel. Somewhat surprisingly, 50% of the millennials share this view.
Recommendations for insurers:
In the article, its recommendations for insurers can be summarised as follows:
Revamp traditional approach to product and industry communication
People understand the fundamental role and benefits of insurance, which can be considered the necessary condition for increasing insurance penetration. This basic understanding, however, does not translate into an economically beneficial level of insurance utilisation. A major reason is the perceived lack of clarity and transparency as far as insurers’ products and the inner workings of the industry are concerned. The survey suggests that a less technical and more regular and proactive approach to communication would effectively remedy this situation.
Enhance customer experience in the ‘moment of truth’
Insurers’ claims processes are the single most important customer concern. About a third of all survey participants complain about the denial of legitimate claims, delays in receiving pay-outs and the complexity of filing a claim. Addressing these shortcomings would go a long way towards overcoming underinsurance.
Respond to customers’ need for financial education
The survey suggests that insurers should place more emphasis on promoting their customers’ financial literacy. Customers are both very realistic and regretful about existing gaps. Against this backdrop, they are likely to welcome support from insurers in reducing knowledge deficits which, as corroborated by a number of previous studies, is set to translate into higher demand for insurance.
Build an omnichannel proposition for distribution
The survey reveals that the agency channel continues to be the most popular option for buying insurance. This holds true for all age groups, including the millennials. Therefore, the digitalisation of the agency force is arguably the core of any future-proof distribution strategy. Insurers need to build an omnichannel proposition to meet today’s and tomorrow’s customer buying preferences.
The bottom line
Protection gaps are well documented. Contrary to general belief, they are not limited to developing and emerging countries but also common in advanced economies. Across various protection needs people use less insurance than economically beneficial - even after taking into account that insureds should retain some risks according to their personal risk appetite, risk bearing capability and cost-efficiency considerations.
Societies are faced with significant protection gaps and practitioners, and academics and policymakers alike struggle to come up with plausible explanations which could inform corporate and public decision-making.
The Geneva Association global customer survey offers a resounding corroboration of the role of behavioural economics and finance in understanding obstacles and identifying potential stimulants to insurance demand.
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Importantly, the report also confirms that many of these behavioural factors are not immutable exogenous factors but can actually be influenced or even reshaped by the insurance industry’s actions.
As far as the prospects of addressing underinsurance are concerned, ‘the glass is half-full’. People do understand the fundamental role and benefits of insurance which can be considered the necessary condition for increasing insurance penetration.
Download the full ‘Underinsurance in mature economies - reasons and remedies’ report here.
The Geneva Association is a leading international think tank of the insurance industry and has been carrying out its research role for the past 46 years.
The full article first appeared on Asia Insurance Review and may be found here.
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