Changing Customer Behavior and the Impact for Insurance
What does the customer want?
A far-reaching consequence of digitization is the changing preference of customers.
The Global Digital Insurance Benchmarking Report states that online activity will continue to replace traditional channels at an ever-increasing pace over the course of the next three to five years. 20–40% of the activities being conducted via traditional channels (in-person, phone, and mail) will move online (daily digital user behavior transmits into the insurance landscape).
Customers want
- Personalized Service (tailored to their need)
- Real-time communication and feedback through digital communication channels
- Value at the point of sale or point of need
- … in their daily life
1. Impact on Insurance
Insurance companies must adapt to new market conditions driven by changing consumer behavior, through advanced technology. The daily routine in the digital world of customers and new understandings from behavioral economics are great opportunities to develop new systems more effectively which unite the needs of digitization, personalized, real-time service and a value. Additionally, customer behavior is also shaped by the large internet platforms. Although we are concerned about data privacy, we are willing to share data if the value in exchange is high enough, as Google and Facebook show, to whom many provide vast amounts of their personal data.
If insurance companies provide products that provide enough value, they can strategically influence customer and prospective customer behavior.
We shouldn’t forget that today’s customers are used to being offered products at the point of sales or need and gain trust into digitally sold products through comparison engines, generous cancellation policies and increasing transparency via third-party accreditation programs.
In particular young millennials find the thought of buying standard insurance products from a broker in person awkward, as they are used to acquire most products and services at the tip of a finger without personal interaction. They want the apps they use, like N26 or Revolut to provide them with the same one-click experience, as they are used to from platforms like e.g. Amazon, Netflix and the likes. Brokers sell the largest portion of insurances in many markets, like Germany, today. They will likely remain a primary sales channel, however, will have to adapt to consumers, demanding communication on the go via video chat, WhatsApp and other interactive omnipresent channels.
Pre-purchase customer research, purchasing, renewals, product cross-sell and upsell, policy servicing, claims management, billing/payment, and customer service will be handled via digital channels primarily.
According to the Insurance Consumer Trends, Customers are open to buying insurance from non-insurers: “Over 60 percent of customers surveyed reported they would be comfortable buying insurance from a bank. Smaller, but substantial, percentages would buy insurance from a tech company, a home service provider, or a retailer. This openness to buying insurance products from non-traditional insurers has grown significantly in all categories since 2013” (https://insuranceblog.accenture.com/new-research-highlights-insurance-consumer-trends)
Technology plays an important role in customer relationship management. For insurance companies that means they need to be much more robust to acquire, manage and act on all of this data.
