Engagement isn’t always the answer

Sometimes less insurance is more.

Some people don’t like to think about insurance. And that makes sense. Insurance products are:

1. Confusing
2. Hard to buy
3. Expensive
4. Compulsory
5. (Often) commoditized
6. Intangible/passive

The prevailing belief in the industry is that most of these attributes are “fixable.” That’s only partly true.

We have little doubt that both startups and incumbents are thoughtfully addressing and improving the way people buy insurance. Distribution is evolving — the process of finding and choosing the right insurance product will become easier. There are also companies addressing price by applying behavioral and other analytics to underwriting and ratemaking (though, that cuts both ways).

However, these activities don’t necessarily “fix” the last few items on the list, which frequently create issues for insurers that want to generate new or loyal customers. This is because customers who see insurance products as something intangible, commoditized, and compulsory end up satisficing. They aren’t seeking a relationship with an insurance brand.

Photo not taken at an insurance event.

As a result, many insurers are fighting indifference using strategies focused on increasing engagement with consumers. The carrier logic goes (loosely) like this: “I know you don’t really care about insurance, but if I give you things (tangible or intangible) related to insurance that you care about, then you’ll care more about insurance.” In theory, that approach makes the product feel less passive (more associations with insurance) and crafts touch points around desirable things (free/cheap/fun stuff) rather than undesirable ones (claims). Ostensibly, this causes people to stick around longer and buy more insurance.

But what if some people will never care about insurance, no matter what you give them? The underlying assumption behind generating interest, motivation, and loyalty through increased interaction with customers appears straightforward: increased interaction = increased engagement. However, this isn’t always the case. For many consumers, less is more.

Consider, for example, the results of a study done by the CEB on 7,000 consumers and 200 executives that revealed misalignments in how customers and companies define engagement. Importantly, the study found little correlation between the number of interactions with a customer and the likelihood they will purchase, repeat purchase, or recommend. In fact, many customers are not seeking brand relationships, value simplicity more than frequent contact, and are susceptible to cognitive overload. For them, interaction can reduce stickiness rather than enhance it.

We could also examine the insurance experience through various behavioral frameworks. For example, most insurance products fit into the safety/security tier of Maslow’s hierarchy, which is second from the pyramid’s base. As the model suggests, once these basic needs are met, people focus on higher-order needs. This implies that people will naturally aim to solve the insurance need, then focus their attention elsewhere.[1] In other words, people intrinsically get more value from directing their interaction and energy towards things other than insurance.

Finally, there is early evidence of a “less is more” approach from insurance consumers. In particular, millennial customers exhibit disengagement with insurance — 27% are actively disengaged with and 42% are indifferent towards their primary insurance carrier. As mentioned earlier, many carriers see this as a problem to fix through more interaction. But what if it’s really our measures of engagement that are broken? A closer look at what actually drives engagement casts doubt on an interaction-heavy approach. According to Gallup, five of the eight primary drivers of millennial customer engagement[2] start with the word “ease”; none start with “more.” This is a strong indication of simplicity and brevity, not increased interaction, driving real engagement.

As a result of “less is more” attitudes towards the insurance experience, in many cases, manufacturing motivation and interaction is the wrong approach. Instead of trying to change behavior, we should seek to better understand customer motivation and build the category around it.

So, we’re doing that.

We’ll talk to you about it soon.

[1] That said, some product categories in the safety tier can move to higher-order tiers. For example, a vehicle can be a source of security (basic transportation) but extend to belonging/esteem (luxury car). However, it’s unlikely that insurance can make the same transition. The core value of the insurance product is safety, and unlike the luxury car, which serves a basic transportation need and makes you feel important, the core insurance product isn’t likely to be directly related to any higher-order needs. Instead, insurance extension into higher-order tiers will be through new products, drawing attention away from the insurance product instead of towards it.

[2] 1. Keeping your account and personal information secure; 2. Ease of making changes to your coverage; 3. Finding answers to your insurance questions; 4. Offering the services you need online; 5. Ease of managing your account; 6. Ease of payment features; 7. Ease of access to information about your policies; 8. Ease of navigating the website