What can insurance brokers learn from online retailers?
Retailers have embraced and profited from e-commerce platforms, how can brokers follow and adopt high street stores’ example asks Quotall’s Director of Marketing Services Greg Roche
Retailers were probably the first sector to undergo digital transformation, and have arguably been the most transformed by it. Before the current crisis we find ourselves in, 20% of all annual retail sales in the UK were online, equating to around £15 billion.
And by 2021, roughly 93% of UK internet users are expected to do online shopping, the highest online shopping penetration rate in Europe, according to Statista. Clearly the social distancing measures we are likely to have in place for some time to come will only amplify this.
In under a decade, this sector has evolved from majority bricks and mortar store-based businesses to full online retailers with comprehensive customer data analytics and delivery logistics.
Now stores – where they exist – are flagships, and serve as add-ons to the powerful ecommerce engines that are now at the heart of modern retail business.
Retailers made this digital transformation under pressure, and not everyone survived the jump, but the sector can offer up some valuable lessons for insurance brokers.
It began with retailers’ reluctant acceptance that online challengers were outcompeting them, which is probably the stage many brokers may be nearing now. Lower entry barriers are emerging for insurance, as they emerged in pure-play e-tail, with new insurtech brokers and MGAs harnessing online distribution.
After all, who wouldn’t rather buy their car insurance online? Picking up the phone or walking anywhere has to be the last resort – and that’s before we factor in the complexities and challenges that life under lockdown has engendered.
A smart yet cheap-to-design website designed for customer convenience can outperform traditional notions of trusted brands and the inherent complacency about customer loyalty.
Millennium-era retailers started with ugly but functional online catalogues. Designed by IT teams to cater for basic business demands, they used few insights from marketing and customer experience. Retailers realised the web lowered costs and firms like Argos had an advantage, as their chain of stores were already, in part, warehouses that had the capacity to deliver the goods to customers.
However, retailers made big mistakes back then, too. The introduction of a ‘mixed basket’, offering both home delivery and click and collect was hugely expensive in technology terms and added little to the customer experience.
This resulted in the next stage; the creation of whole new departments, such as web marketing, and new mechanisms, like auto-filling addresses and ‘click and collect’, as organisations began to think about joining up independent and disconnected silos.
Thinking about the customer
Amazon’s Jeff Bezos is famous for leaving an empty chair at the conference table to represent the customer. But on many occasions taking the customer’s perspective is the elephant in the room.
It’s often repeated that the insurance business is bad at this: specific products and their many exclusions, terms and conditions are perceived to be more tailored for the underwriter than they are bespoke to the customer.
The insurance world cherishes its own language and its own way of doing things, which are sometimes long winded or clumsy; it needs to realise that when, for example, the customer only has to close a tab with just a click, the sector must try harder to find a way to appeal more to its customers.
Data profiles for customers
Retailers have continued to improve their website functions to make browsing a more pleasant and personalised shopping experience, using the data they have on individual customer preferences combined with sophisticated search functions and shopper-oriented landing pages to market ranges more valuably and with a keener eye.
Marketing, too, stepped up, driven by user behaviour and expectation. In parallel, social networking became more pervasive and recognised as an extension to user functionality. Whole new web industries spawned for search engine optimisation, making online payments, and comparing ratings and reviews.
Digital went from being an important channel to being the channel. And there is no going back.
Retailers have recognised this with an omni-channel approach to customers, meaning a single relationship with the customer encompassing any and all channels, increasingly driven by the rise of big data, AI and the Internet of Things that make it possible to keep track of so much valuable intelligence.
Questions about which player in the chain – for example between the underwriter and broker, or between an e-retailer and the manufacturer – owns the crucial data to win a war of AI and analytics, have become paramount. Retailers are already thinking about the next levels, including AI-driven predictive shipping and increased personalisation.
The relative sophistication and innovation achieved on the retail side has become impossible to ignore. Data-driven approaches to pricing, or deep insights into customer behaviour, for example, can apply to buyers regardless of whether they’re wearing business shirts or sweatshirts. Business-to-business commerce has belatedly cottoned on, and insurance is still in the early stages.
All the ingredients are there
As the world becomes ever more interconnected through online channels, companies are increasingly focused on offering value-added services, and insurance is seen externally as one of these value-added services.
This is a huge opportunity for our industry, and offers insurance businesses and retailers (and manufacturers) plenty to work together on.
Retailers want to tap insurance as a new revenue source in their omni-channel cross-selling strategies, while the potential for B2B players to offer specialised commercial insurance is still mostly unrealised.
And with just 5% of the insurance market currently distributed through non-insurance channels, there is an enormous latent opportunity for savvy non-insurance brands to add a high margin, highly targeted and relevant insurance proposition to their customers.
Insurance, for its part, is a data-crunching business about selling a virtual product that doesn’t have delivery costs. It is more efficient to sell and should be more convenient to buy online.
How fast the insurance industry catches on, who knows, but the winners in this digital transformation will be those innovators that turn their thinking around completely.
For our part, we’re here to make that transition happen more smoothly.