Customers Want to Pay Less for Insurance: Learn How to Make that Happen
A recent study by J.D. Power suggests that the number one driver of insurance customer satisfaction is the price factor. A study by LexisNexis on insurance customer behavior sums it up this way: “When [insurance] consumers shop, price outperforms loyalty” and further observed that “50% of Shoppers expect to shop again in the next year. Once in five expect to switch carriers when they do shop.”
Studies like these simply reinforce what insurance sales professionals have known all along, duh! The answer is so simple to winning insurance customers – give them better prices. However, the solution to lower prices remains elusive to the insurance industry, in general. That leaves customers to seek their own way to insurance happiness. Two direct-to-customer insurance carriers (with lower cost distribution models) in the US – GEICO and Progressive – took 92% of all premium growth in 2019, according to J.D. Power. That is an incredible statistic that traditional insurance distribution players should both envy and fear.
We don’t believe that choosing direct or agency distribution is the best option. When you look at the consolidated P&C industry, distribution costs have remained near 30% world-wide for the past 3 decades. McKinsey reports that distribution expenses have gone up by 40% in the past 10 years when indexed to 2009. At the same time other industries have reduced their share of distribution costs.
The solution is as old as insurance itself; insurance distribution stakeholders must cooperate to make insurance better and more affordable for all. However, it’s like the prisoner’s dilemma, each person has the choice between behaving opportunistically (defection) and responsibly (cooperation). The best possible outcome is multilateral cooperation but it is difficult to realize because each person benefits unilaterally from defection. So far, most insurers have chosen defection with some exceptions.
Innovative technologies and platforms allow for better outcomes including a lower cost structure that will, not surprisingly, make customers satisfied with lower prices.