The rise of the new insurance customer – are you ready for them?
In our new consumer research report, The Rise of the New Insurance Customer: Shifting Views and Expectations, we captured the views and expectations of today’s consumers in the midst of the disruption and change rapidly unfolding in the insurance industry. The unprecedented converging trends of people, technology and market boundaries outlined in our Future Trends: A Seismic Shift Underway report highlight how they are disrupting and redefining the world, its industries and its businesses – including insurance. Insurers, MGAs, reinsurers and others must embrace this shift by understanding changes at play and accept that everything we have known about insurance was good for yesterday, but not good enough for today or tomorrow.
These converging trends are fueled by the InsurTech movement that wants to take advantage of the disruption and by a rapid, perpetual shift in customer expectations. This research took a deeper dive into the People component, to understand eleven key insurance industry perceptions across the spectrum of researching, buying and servicing, consumer’s response and the implications for the insurance industry. Specifically, the research dives into this shift with more insights on the move to digital, an expected shift by Millennials and Gen Z — but it also highlights that Gen X is often dramatically aligning with the Millennial and Gen Z consumer behavior.
The Rise of the New Insurance Customer compares insurance against 9 other industries across the spectrum of consumer experience. The resulting perspective is that insurance is not “easy to do business with.” Some key insights from the research are:
- Insurance is “dead last” in terms of industries that are easy to do business with and a good value. L&A is significantly lower than P&C compared to the other industries / businesses with which consumers regularly interact.
- The Net Promoter ratings across the industries / businesses show insurance as having relatively low NPS scores, with swings to online retailer Amazon’s score between 40 and 70 points.
- No industry is perfect when it comes to creating ideal customer experiences for research, buying and servicing, but online and national retailers set the standard for all industries. We refer to this as the “Amazon effect.”
- Millennials and Gen Z clearly show different expectations than the Silent generation and Baby Boomers. Gen X often aligns with Millennials and Gen Z, highlighting the gap between traditional insurance over the last 50 years to insurance today and looking forward.
- The generational gap reflects an insurance industry steeped in tradition, where business models, business processes, channels and products are becoming rapidly irrelevant for the younger generations. The result is an open door to fresh, culture-savvy competition.
The implications for insurers are enormous. Over the last decade or so, many insurers have focused on transforming their businesses by replacing their legacy core systems with modern solutions surrounded by digital and data solutions. But the rise of new customer expectations does not necessarily align with these transformations. Why? Because many insurers did not anticipate the needs of the rise of the new insurance customers by transforming their business models, channels, products, services and engagement to meet the new generation of buyers. The result will be a potential shift in market leadership with customers selecting insurers that best meet their needs and expectations. In North America for both P&C and L&A insurers combined, this puts $1.4 trillion of premium at risk.
The large differences between the generations on many aspects of the insurance experience highlight that established insurance companies (decades or centuries old), were built for the two older generations, the Baby Boomer and Silent generations, which are declining in size and revenue power. In contrast, the two younger generations, Gen Z and Millennials (and increasingly Gen X) have different experiences and behaviors that are at the core of why insurers need to redefine and reinvent themselves. Loyalty is now influenced by how well insurers meet their needs and expectations for products, engagement and value.
The five generational groups underscore a shift that insurers must make to be relevant and competitive. It is a fundamental shift of a decades-old traditional business model, products, process and technology that were built to support the focus on products, mass standardization, operational efficiencies and automation. These are no longer effective in a market that demands customer driven, personalized engagement, innovative products, simplification, transparency and everything digital. It’s time for “it’s always been this way” thinking to go away.
Each company must ask themselves strategic questions, such as: “How do we bridge between the past, today and the future? How do we keep current customers loyal and engaged as we redefine our business for a new generation?” If traditional insurers don’t ask these questions and proactively respond, others will.
Both existing insurance companies and new entrants are proactively responding as evidenced by the large amount of activity in the InsurTech space. Many think there is a better way for insurance to work, and they are acting on this belief and getting significant capital to make it a reality. In so doing, they have the opportunity to steal substantial market share from those companies that don’t ask themselves and act on the same questions.
And while many of these are in the early stages and are yet to be proven, consumers are very interested in these efforts as demonstrated by the early results of Haven Life and Lemonade. Consumers are looking for fresh alternatives to age-old formulas. They will note whether an organization is completely new, with an innovative idea or whether the organization is established but progressive in its approach. They will also know which organizations may be established, but not willing to cater to their preferences. In all cases, they will be looking at value, service, ease and understanding.
How should insurers proceed? There are alternative paths that insurers can take depending on their strategies and resources. But the bottom line is that based on the perceptions, reality and implications outlined in the research, companies must stop talking about the opportunities and being digital, and start doing something about it by using the disruption and change as a catalyst for “real change.”
This change requires companies to rethink their business model and realign it with the customer needs and expectations of those who will be their customers for the next 10-20 years, not those from the past 10-20 years. It requires a renaissance of insurance to capture the revenue growth potential presented by the rise of the new insurance customer.