With contributors from Zurich, AVIVA, Standard Life and Liberty Insurance

The nature of risk is changing. Driverless cars, dashcam recorders, smartphone home surveillance and wearables enabling the quantified self – these are all trends that are going to alter the insurance landscape in the near term. We are moving from the era of science fiction to science fact.

These technological advances are, in part, contributing to an overall decline in the traditional risk factors habitually covered by insurers. For example, in the UK, crime rates only experienced a two per cent rise in recorded crime in 2014 after a constant decline of 20 years (The Independent1). In the US, violent crime is at its lowest recorded level since 1978 (Time2). As a result, insurers are having to take a long, hard look at their business models to understand how to remain relevant to the customer, today and in this new future. 

But before technologies appeared on the scene to change the nature of insurance, consumer behavior had also undergone a wholesale paradigm shift. Instead of an annual summons to a broker or bank to arrange coverage for another year under terms and prices that were very much in the supplier’s control, over the last five years it is the insurer who has been at the consumer’s beck and call. How has this change come about and who is responsible?

The aggregator precedent 

Insurers agree that the impact of digital channels, and by extension, the aggrega¬tors, on the sector has been seismic, completely altering the relationship between the consumer and insurer. 

“Over the last five years customers have become better educated in terms of wants and needs from insurance. You’d have to look back further than that to appreciate what a swing this has been.The emergence and dominance of aggregators putting the control in customers’ hands hasn’t been great for insurers. Customers now have complete market choice in a matter of minutes. They’re no longer willing to accept what insurers are pushing to them,” states Tom Carlin, Head of Distribution at Liberty Insurance.

As a first stage in the evolution of consumer behavior, the aggregators created a price transparency that for a time delivered something of a race to the bottom. With consumers believing there was little or no inherent value in the annual distress purchase – until claim time of course – aggregators did create a lowest price wins trend. But only for a time. 

Carlin adds: “To get the cheapest price, insurers were bundling costs behind the scenes and charging to amend policies and so forth. Five years ago, 80-85% of business came from the top position on the aggregator but today that figure is more like 50% because the customer is self-educating. For insurers, this means what do they have to do to add true customer value, rather than strip out cost?” 

While insurers were fighting a price war online, other sectors were creating customer experience expectations that also looked set to challenge the market. Particularly in the digitally native, start-up environment, customers were seeing a growing seamlessness across channels. They would expect to begin a transaction or interaction online and be able to resume that experience on mobile, via the telephone or in-store. 

“Customer expectations are not specific to insurance. They know they can get omnichannel services and so they don’t draw a distinction between groceries or insurance. The idea of omnichannel with people picking how they want to interact, starting in one place and picking up in another – that’s tough to do, but it’s what we are working to deliver,” states Adam Kornick, the Global Analytics Director for Aviva Insurance. 

This remains an imperfect science even for the most digitally savvy organisa¬tion, but it has created an expectation among consumers that any company can provide information, services and value both on and offline. Zurich Insurance’s Global Head of Marketing, Monika Schulze adds: “Customers want to buy with confidence. The challenge for us is that the trust level in the insurance sector is low. The internet is changing the way customers interact with us, they want all the information online and sometimes even buy online. We have been focusing too much on selling our customers products through intermediates and that’s it. In order to be successful we need to have an ongoing relationship with our brand and company.” 

Making it personal

“We have to find solutions where we don’t just communicate once a year,” Schulze states, but adds that it is understandable that the concept of insurers building relationships with customers is a difficult one “Is my emotional connection to my Tesla higher than that to my insurer?” she asks, adding: “You have to get into an emotional space that adds something meaningful for the consumer.”

Authenticity is an issue that insurers are seeking to broach. As relates directly to the insurance product there is little reason to engage in ongoing dialogue. However, there are avenues where the insurer has a natural – and critically, authentic – role to play. 

For example, Aviva’s Drive app that encourages good driving and delivers personalised scores for discounts on insurance. Although not directly related to insurers, equipment such as the Nest heating monitor help users be more mindful about energy useage. Insurers can use these various tactics, alongside fitness trackers such as Fitbit and Jawbone, to offer information about how users might maximise their lifestyle benefits. 

This is a relevant and authentic way for insurers to build ongoing relationships with consumers but there is a word of caution here too. While risk and claim is virtually exclusively the domain of the insurer, lifestyle improvements are relevant but by no means exclusive. In trying to build relationships with consumers this way, insurers must realise they are competing with utilities, car manufacturers, gyms and even fashion retailers for the customer’s attention. This is where information and experi¬ence are vital. 

Building a relationship around what has traditionally been considered a single, annual, distress purchase is already difficult but customers are also demanding relevancy and targeted communications. Where once one to one marketing was touted as a way to increase conversion, the consumer has now taken ownership of the concept and if the relationship isn’t personalised from the outset, there won’t be any relationship at all. 

Personalisation means more than simply knowing the name of the individual. It is about listening and understanding their needs and creating experiences and products that match them. “Customers are talking to each other on social forums. They can learn from each other rather than sit back and listen to what the company is telling them. They trust the people they engage with online more than the company. But from the company, they want information that’s relevant and tailored beyond the standard communications,” insists Standard Life’s Managing Director, Customers and Marketing, Stephen Ingledew. 

Zurich’s Schulze also believes that the traditional ‘risk and foreboding’ stance that insurers typically take must be reviewed if relations are to be personal and ongoing: “You have to get into an emotional space that adds something positive for the customer. It is not helpful to scare people all the time.” In this case, the tone must move from ‘this app provides alerts of cyber threat’ to ‘this app lets you access your devices and change settings any time, anywhere – in total security.’