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Price Is a Winner with Insurance Customers

Over the past 5 years the insurance industry has seen a frenzied intensity of new entrants all vying to unlock opportunities that newer technologies represent. Yet, there has been no clear winners or losers as insurance stubbornly plods along on its change resistant path. Whether that is good or bad depends upon your perspective.

The one perspective that is very relevant is the perspective of consumers. Consumers that have been heavily exposed to other industries transformed by technology. The most successful companies have committed to embracing customers in many ways but one; saving customers money. Yes, service, quality, [user] experience and access are all important, but the rubber really meets the pavement when you save customers money.

Saving customers money comes hand in hand with better user experiences. Look at the miserable shopping experiences that insurance shoppers are willing to endure for completely imaginary savings. They are so desperate now for a “better deal” on insurance that they are willing to go to a comparative rating website to get a few quotes. First they must answer all of the comparative rater questions, then if a quote entices them to continue the process, they often have to answer the same if not more questions all over again. A higher (and more expensive) level of integration between the comparative rater and the insurer hopefully allows the shopper to not have to answer the questions all over again.

Price Does the Talking

Any underwriter or broker understands the power of pricing in attracting customers. Existing distribution models simply can’t compete on price, so they rely on other non-price elements to entice customers. Direct insurers (including those that are owned by insurers who are “dedicated to the independent broker channel”) have taken over 7% of the market share from agents in the past 10 years. Price does the talking as directs have a 6%-10% advantage over the agency distribution channel. Even comparative raters that traditional agency distribution stakeholders are attracted to, can’t overcome the price discrepancy.

Here are recent quotes from credible industry sources:

“the price factor…has increased by 54% as a key driver of satisfaction” – J.D. Power 2020 U.S. Insurance Shopping Study- April 30, 2020

“early movers are seeking out competitive advantages” – 7 Business Models of the Future for Insurers – EY’s Global Insurance – March 18, 2020

“When consumers shop, price outperforms loyalty” and “50% of Shoppers expect to shop again in the next year. One in five expect to switch carriers when they do shop.”Insurance Shopology: The what and why behind consumer insurance shopping behavior – LexisNexis – September, 2019

“36% of [insurance customers] are willing to buy insurance from a big tech company like Amazon, Apple or Google” Nathan Golia – May, 2020

“[Insurance] Customer use of digital channels, especially mobile, is rising rapidly” – Customers Know What They Want. Are Insurers Listening? – Bain & Company October 2018

Amazon is the best example of an industry changer. It is not uncommon, for even the insurance industry, to use “Amazon like” to describe something that approaches the customer centricity of Amazon. Yet, the insurance industry is far from seeing anything that approaches the Amazon experience. This would have to include a side by side comparison of alternative products with some kind of recommender system. Price would have to be good and purchases could be made instantly.

Embrace New Alternatives

Regulation is often viewed as a hurdle preventing the industry from capitalizing on better user experiences. However, a larger factor would be reluctance to embrace technology in new ways. Instead, we continue to embrace what hasn’t worked including disparate systems requiring heavy integration that costs a lot of money but still can’t and may never do what is possible.

Insurers can supercharge a customer-centric focus through the expanded use of automation and artificial intelligence. Full automation can cut costs, improve service, throughput and capacity. AI, from machine learning to chatbot technology can greatly enhance the customer experience.

A powerful example of newer technology working for customers and insurers is Awywi’s new Insurance as a Service Platform. No investment or prior technological capability is required for insurers. Now is the time to prepare for the future by investing wisely in technology that will give customers what they want most, Savings, service, and a better experience.