Posted on 02 Sep 2011
The same phenomenon has been taking place -- on a larger scale -- with consumer adaptation of technologies. We have seen industry after industry scrambling to cope with consumers who demand anytime/anywhere access to information and service. Simultaneously, consumers have made social media a powerful platform for product research and information sharing.
In the insurance industry, we believe this has led to what we call a "looming expectation gap" between what consumers want from their insurers and what they feel they are receiving. In survey research with 7000 respondents in 13 countries, we heard again and again that, while people are generally satisfied with their insurance providers, they expect more in terms of the resolution of customer service issues. These expectations are fueled, in part, by consumers' own knowledge and use of technology. Younger consumers, and those from emerging markets, are more interested in innovations such as mobile service, but they are also more likely to shop around.
For example, more than three-quarters (76 percent) of respondents below 35 years expressed interest in using mobile devices to text insurers to receive updates on claim requests, or to interact with agents and brokers through smart phones equipped with video capabilities, compared to less than half (46 percent) of respondents over 45 years.
Despite overall satisfaction levels, more than three-quarters (78 percent) of respondents think that insurance products and services are not easy to understand. Almost the same number of respondents (75 percent) believes that insurers generally offer the same products and services. In addition, more than three-fifths (61 percent) of respondents said that it was very important for their insurer to provide prompt and effective service, or to answer requests in a timely manner, but only 32 percent of respondents were very satisfied with their insurers' ability to deliver such service. And, while 53 percent of respondents stated that access to the information they need whenever they need it is very important to them, only 29 percent felt very satisfied with their insurers' capacity to provide assistance on a 24-hour, seven days per week basis.
Our research indicated that younger consumers and customers in emerging markets are the least loyal. On average, more than one-fifth (22 percent) of respondents said they were likely to stop doing business with at least one of their insurers in the next 12 months but the figure rose to 31 percent amongst the 18 to 24 age group and was significantly lower at 10 percent among the over-55s.
Customers in emerging markets are also more likely to switch insurers to get products more relevant to their needs. For example, 96 percent of
consumers in China were likely to switch, compared to 76 percent on average and only 59 percent in the U.S. Satisfaction levels in the U.S. were quite high, at over 95 percent for consumers of life, car and homeowners' insurance, so a lower propensity to switch is not surprising. However, almost half (46 percent) of U.S. consumers said they were interested in new services that might be offered via mobile devices, including the ability to text insurers and receive information via text; the ability to interact via video-enabled smartphone; access to insurers and information via Web 2.0 applications; availability of insurance applications on iPads and other tablets; and availability of interactive needs analysis on iPads and other tablets.
Both young and emerging markets customers are the most willing to pay a premium to get products more relevant to their needs. Almost three-quarters (70 percent) of 18 to 24-year-olds said they were willing to pay more for this, compared to only a third (33 percent) of over 55s and 38 percent of 45 to 54-year-olds.
Clearly, the fast-growing middle classes in emerging markets are determined to protect their new-found affluence and this has led to strong demand for insurance. This is a big opportunity for global insurers, but they need to have a thorough understanding of the different groups of customers, especially the younger ones. It will be important to develop innovative, personalized products and services and deliver them across all of the preferred channels.
Although insurers are not yet delivering what customers want in terms of technology and access, they can differentiate themselves and gain market share by leveraging analytics to assess which products and services are working best and which need to be changed to deliver a better customer experience. Insurers who meet customers more than half-way can establish and maintain a significant source of competitive advantage in the years to come.