Global Consumer Insurance Survey 2012 Time for insurers to rethink their relationships Trevor Rorbye, May 2013!@#
Agenda The current environment - Time for insurers to rethink their relationships Why? Ernst & Young Global Consumer Survey Key Takeaways - Q s 2
Time for insurers to rethink their relationships Why? Driving Customer centricity Focusing on service throughout product lifetime Providing alternative forms of distribution Better use of data Market The actuary s role is to support the organisation in finding the optimal balance More wise to their needs Moving from Products to Propositions (CVPs) More aware of offers from alternative sources Treating Customer s Fairly Protection of information bill SAM Retail distribution review (UK) ECJ Ruling on gender (Europe) Regulator Customer Becoming more demanding around service Want to be rewarded for loyalty More aware of rights and where they are protected Embracing the era of online and social media 3
The consumer agenda The challenge and the response The Challenge Customer behaviour is changing rapidly Technology, and in particular the growth of online and social media, is driving a fundamental shift in customer expectations. There are changes in terms of how products are marketed, priced, sold and serviced, and how companies are perceived. Pure internet businesses have set new standards for customer-centricity and raised the performance bar for players in every retail business sector. The Response In response to this, Ernst & Young commissioned a Global Insurance Consumer Survey. We set out to explore customers attitudes and behaviors, to separate myth from reality and provide some hard evidence of what customers want today. The findings suggest that insurers can no longer rely on received wisdom about what consumers think and how they behave...insurers must listen to the voice of the customer. 4
The Global Consumer Insurance Survey Listening to the voice of your customer Ernst & Young s Global Insurance Consumer Survey is a global research project using the independent research firm Ipsos to canvass the opinions of 24,000 consumers in seven regions around the world between August and October 2011. There are significant variations in customer attitudes and behaviours around the globe. This is driven by the diverse economic, demographic, competitive and regulatory environments. The underlying themes that are remarkably consistent. Listen to the voice of the customer 5
The Global Consumer Insurance Survey The methodology The survey is the most extensive of its kind the breadth and depth of the research appears to be unprecedented. Scope and Reach 24,000 consumers across 23 countries in 7 regions: Americas Asia Pacific Europe India Japan South Africa United Arab Emirates Typical sample size 1000 (US, UK and China 2000, some countries smaller) Conducted primarily online, with some face to face interviews (India 50% face to face) Research Purpose To better understand the behaviors and expectations of consumers around the world To identify how companies need to evolve to meet consumer expectations and to capture the growth opportunities Report Structure Our global findings are presented in 7 reports: Global Executive Summary 6 regional reports Our report is focussed on exploring the myths that surround the insurance industry today Questionnaire Design Structured around key themes: Attracting Deepening Retaining customers 36 non-life and 38 life questions including regional specific questions covering the customer lifecycle from initial research through purchase, servicing, repeat purchase, claim and termination Data analyzed by our specialist insurance teams around the world, at country and regional level by age and income segment, channel and product holding This presentation is a summary of the full survey findings. The data can be further analysed on a country level by age and income segment, channel and product holding to provide tailored insights. 6
Exploring the myths in the Insurance sector Our findings explore the received wisdom of the Life insurance sector We set out to explore what drives consumer behaviour in the life and non-life sectors. Our results are structured around ten commonly held beliefs within the industry, that we refer to as received wisdom. Life insurance myth Myth 1: Consumer confidence in the insurance industry is low Myth 2: Life insurance is sold, not bought Myth 3: Personal interaction is essential Myth 4: It s hard to cross sell to existing customers Myth 5: Providers can t materially influence persistency Life insurance reality The good news is that consumers generally appear more confident in the industry than might be expected Customers want to make better-informed decisions when purchasing, rather than relying on the industry to know what s right for them Customers expect to do far more research in future, using online sources, even though they may continue to use an advisor to complete the purchase Customers want to be rewarded for loyalty and repeat sales. Providers could influence existing customers in this way Providers could influence retention if they were better at meeting customers changing needs and were prepared to offer better deals to stay 7
Exploring the myths in the Insurance sector Our findings explore the received wisdom of the Non-life insurance sector We set out to explore what drives consumer behaviour in the life and non-life sectors. Our results are structured around ten commonly held beliefs within the industry, that we refer to as received wisdom. Non-life insurance myth Myth 1: The future is online Myth 2: It s only about price Myth 3: Good claims experience builds loyalty Myth 4: Customers don t respond to cross selling Myth 5: Insurers can t influence customer retention Non-life insurance reality Online is an important part of the future but as one component of an integrated channel management strategy As prices converge due to an increasingly transparent pricing market, buying factors such as brand and service become more critical Poor claims experience will drive disloyalty but a good claims experience will not stop customers shopping around While levels of cross-selling are low, customers are willing to buy multiple products from existing providers and in fact many prefer to do so The right customer service can have a significantly positive impact on retention. Price is always important but sometimes in the form of "discounts" or "loyalty bonuses 8
Key findings: Life and pensions 9
Life sector Myth 1: Customers have low confidence in the life and pensions industry The received wisdom: The financial crisis has created mistrust of financial services, and a perception that all financial services companies are untrustworthy. What we found in reality The reputation of the life insurance industry has not been tarnished by the global crisis. The majority of customers still have reasonably high satisfaction levels and are confident their product is right for them. For a significant minority, insufficient information about their product and its performance is undermining confidence. Customers generally rate insurers on a par with other industries, but behind on service quality and rewarding loyalty. Implications for insurers Insurers must demonstrate value through a balance of price, product features and service with a convenient and transparent buying process. There is no room for complacency: for a significant minority of customers, insufficient information about product suitability is creating a lack of confidence that their product is right for their needs. 10
Life sector Myth 2: Life insurance is sold, not bought The received wisdom: Because of a lack of customer knowledge and confidence, life insurance products are sold to consumers - the purchasing decision is not customer-driven. What we found in reality Customers are becoming much more willing to research for themselves and are becoming used to and expectant of a transparent, information - rich environment. Customers will increasingly use online media to research, even if they ultimately rely on conventional channels for purchase. Product complexity deters customers from making purchases independently. Implications for insurers Customers want products and the purchasing process to be simple and transparent, making it easier for them to make an informed choice. Insurers may need to choose where they invest across the value chain, to avoid adding extra cost while still paying agents/ intermediaries for services customers may prefer to do themselves. 11
Life sector Myth 3: Personal interaction is essential The received wisdom: Personal interaction is essential to educate customers about their financial needs and explain which products to buy. What we found in reality Life and pension customers continue to have a high preference for personal interaction to complete a purchase. The main reason being the need for expert assistance due to the complexity of the product. A minority of the customers, mainly in developed countries, would prefer making purchases completely independently without using and adviser. Implications for insurers Insurers will need to ensure they (or their distributors) deliver personalised contact, particularly to support purchase but not necessarily face to face e.g. through online/phone contact. Insurers must respond to the emerging self directed segment with self-service offerings. 12
Life sector Myth 4: It s hard to cross sell to existing customers The received wisdom: Customers are reluctant to buy more products from the same provider. What we found in reality The current level of repeat purchase is low overall and varies between regions. Consumers are willing and indeed prefer to buy more products from one company. The perception is that insurers could do more to reward them for participating in long- term relationships. Consumers are used to many other industries rewarding their loyalty, and they expect the same from insurers. Implications for insurers Insurers need to build trust by delivering on expectations, making it easy to buy, rewarding loyalty and incentivising multiple purchase avoiding high pressure sales techniques. Life companies should work with intermediaries to align incentives to cross-sell. 13
Life sector Myth 5: Providers can t materially influence persistency The received wisdom: Providers feel they have little real ability to retain customers. What we found in reality Customers perceive that providers do little to attempt to retain them. Providers could influence retention if they were more proactive, better at meeting customers changing needs and were prepared to offer customers better deals to stay. In most territories consumers perceive the industry as lagging behind others in rewarding loyalty. Implications for insurers Retention is not just a last minute activity loyalty is earned over the customer lifecycle by delivering on expectations, meeting changing needs and rewarding valuable relationships. Insurers can encourage longer-term relationships through rewarding loyalty. 14
Regional Comparison Myth 1 Customer s have low confidence in the Life and Pensions industry Americas US Canada Brazil Mexico 85% of customers are very confidence that they have the right product Consumers in the Americas have highest customer satisfaction (7.5/10) 39% of customer believe Insurance sector lags behind other industries in service Customers cited simpler communication, Named contact, Greater speed and improved on-line information for suggested areas of improvement Asia Pacific Malaysia China Indonesia Mexico Australia HK South Korea 77% of customers are confident that their products meet their needs. (However ranging from 59% in South Korea to 93% in Malaysia High agent attrition rates exist which results in orphaned customers. Key focus is on driving customer adoption and handover strategies Customer satisfaction is at (6.8/10), with 42% of customers believe that the industry lags behind other industries in service delivery Customers cited clearer information around product performance, improved sales experience and more competent agency force as suggested areas of improvement Europe UK Germany Netherlands Turkey Italy Spain Poland France Most countries have a positive view of the insurance industry. 79% of customers are confident that their product meets their needs Overall customer satisfaction score is 7/10 (6.6 Italy and 7.3 UK) Customer believe that the industry performs less well when comparing customer service and rewarding customer service Customers want the industry to serve them better citing, greater accessibility, Named contacts, Improved information on-line, clarity of communication and information about products India 93% of customers surveyed across income groups, channel and age categories feel very or fairly confident that their product meets their needs 50% of respondents believe that the industry as a whole is behind other sectors in delivering quality service to customers Mis-selling is a concern as there is a perception that focus is on product push rather than needs based. Also product performance is not always transparent Customers citing, better claims processes (53%), better general admin (33%), faster response times (31%), better communication transparency (30%) as suggested areas of improvement 15
Regional Comparison Myth 1 Customer s have low confidence in the Life and Pensions industry Japan Japanese customers are less happy then the other regions, with a customer satisfaction score of 6.2/10 Selling practices are heavily reliant on family, friends and trusted agents, therefore personal understanding of products are quite low Customers perceive the industry to be significantly behind other sectors on service quality. Customers cited easier accessibility, clearer and transparent communication, improved access to online services and better claims processes as suggested areas for improvement UAE South Africa (Largely urban community sampled) 80% of customers say that they are very or fairly confident that their products meets their needs 92% of customers surveyed feel fairly or very confident that they have the right product to meet their needs Although customers are generally happy they have the right products, customer satisfaction score are quiet low (6.5/10) Overall customer satisfaction is 7.9/10 and the industry is perceived positively in terms of service and rewarding customer loyalty 30% of respondents believe the industry is behind other sectors on service. There is a general view that all personal contact and F2F service is poor Customers that dissatisfied cited either actual product performance issues or terms/feature and benefits linked to the performance Customers cited greater transparency, improved information from providers, better online services as suggested areas for improvement Customers cited better communication, call centre effectiveness and general administration as suggested areas for improvement 16
Conclusion The combined impact of these findings is simple but profound: insurers need to become as customerfocused as other consumer businesses, and deliver a genuinely customer-centric experience. This means: Putting the customer, rather than the intermediary, at the centre of the business model, and using customer data to develop deep insight into their needs and to offer the right product Working with intermediary channels to be sure that they support your target customers effectively Providing a suite of simple and transparent products, tailored to life-stage needs, that customers can understand and purchase with confidence Making it easier to access relevant product information throughout the customer lifecycle and using various channels (e.g. on-line, trusted advisor) Building trust by delivering a great customer experience and anticipating and responding to the customers changing needs Rewarding customer s loyalty with incentives that recognise multiple purchasing and value of the overall relationship Proactively seeking to continually understand and address any underlying factors of dissatisfaction end to end across the value chain Listening to the voice of the customer 17
The Global Consumer Insurance Survey Data analyser tool FILTER CATEGORIES Country Product Type Gender Age Group Income QUESTION CATEGORIES Attracting Research levels and sources Purchase influencers Agent status preference Importance of personal interaction Deepening Confidence and service satisfaction Contact needs Contact satisfaction Service satisfaction Additional products Retaining Switching behaviour Customer drivers Perception of insurance 18
Key findings: Non-life 19
Non-life sector Myth 1: The future is online The received wisdom: Use of internet resources is growing rapidly and in future online will be the dominant channel, not only for research, but also transactions. What we found in reality In all countries we found a growing trend to use the internet to research non-life products. Levels of actual purchase vary considerably between countries. We found that most countries have a continued preference for more conventional channels to complete the purchase, including agents/brokers and direct channels. What are the implications for insurers? Most customers still prefer a mix of on-line and personal contact. Success requires finding a way to integrate new technology with existing channels not just in the sale process but for service and claims also. Achieving a seamless and consistent response will require a significant change effort for many. 20
Non-life sector Myth 2: It s only about price The received wisdom: Non Life products are perceived as commoditized and price, therefore, is the only criterion on which they are purchased. What we found in reality Price is often an important factor but its importance varies by customer segment. Customers value both pricing and service elements but Insurers are at risk from under-investing in the service component. Brand, financial strength and service are all important considerations and, in some regions, more important than price. What are the implications for insurers? In some markets price is less critical, where tariffs remain or where price is being levelled by comparison sites, non price factors are key competitive drivers. Increased pricing transparency through online sites leads to price convergence and secondary factors become critical differentiators such as brand, reputation or financial strength. Pricing models need to be ever more sophisticated to account for these secondary factors and a clear understanding of the cost to serve different customers ever more critical. 21
Non-life sector Myth 3: Good claims experience builds loyalty The received wisdom: If providers offer a good claims experience, customers will be delighted and this will drive loyalty and help build brand value. What we found in reality o Poor claims experience is linked to low renewal rates but good claims service is largely regarded as a given rather than a reason to renew. o A good claims experience will not stop customers shopping around but poor claims experience is likely to drive switching irrespective of price. o Claims therefore has a significant downside risk. What are the implications for insurers? Customers expect a seamless combination of personal interaction and on-line servicing for claims handling, increasing pressure on the sophistication of insurers operating models. Organisations will need to invest in their claims service, processes and technology to manage claims costs down and minimise the risk of customers leaving. 22
Non-life sector Myth 4: Customers don t respond to cross selling The received wisdom: Customers don t enjoy the sales process and resent insurers trying to sell them additional products. What we found in reality In many territories a majority of customers prefer to buy multiple products from one provider. Customers expect insurers to demonstrate an interest in retaining their business. Customers want to build relationships with providers they trust and who make it convenient for them. % that cite simplicity as a key reason for buying multiple products from a single provider 63% Europe Americas Asia-Pac 67% 65% 61% 65% 72% India Japan UAE What are the implications for insurers? Customers will expect that insurers will use the data they hold on them to offer more relevant products at lower cost through a convenient buying process. In most territories, consumers perceive the life and non-life insurance industry as lagging behind other consumer industries on rewarding loyalty. This is an area which insurers could address to improve cross selling. 23
Non-life sector Myth 5: Insurers can t influence customer retention The received wisdom: Providers feel they have little ability to retain customers it s just not something they can control. What we found in reality Customers expect companies to contact them at product renewal or maturity, and as their needs change. In nearly all regions, the majority of customers felt that insurers make little or no effort to retain them. Our survey shows that customer are more likely to renew if insurers make more effort to retain their business. What are the implications for insurers? There is a difference in switching behaviour between customer segments, this means companies need a clear understanding of their cost to serve so they can identify their most valuable customers and develop a range of tactical responses to keep them. These responses need to include product flexibility as well as discounts to provide retention teams the tools to enhance profit as well as revenue. 24
Conclusion Non-life sector Non-life sector providers must deliver convenience and value by: Integrating online and offline channels seamlessly to meet changing customers needs over the product life cycle. Making sales and renewal simple and convenient for customers across whichever channel or medium they chose. Understanding how to personalize service and show customers they are valued, particularly in an ever more digital environment. Analyzing the cost to serve the many customer micro segments to understand how to service expectations and profitability differ particularly for managing risk selection and retention effort. Developing and managing insurance brand(s) to ensure they support the key value messages and communicate this effectively in the digital world. Listen to the voice of the customer 25
A global and regional perspective Further reading To provide deeper insights into what consumers think of the sector and what drives their decisionmaking you can review our six detailed regional and country reports: 26
Thank you Colin Daley Associate Director Tel +27 (0) 11 772 3396 Mobile +27(0) 83 602 7696 Fax +27 (0)11 772 4396 Email colin.daley@za.ey.com Alex Thomson Director Tel +27 (11) 502 0679 Mobile +27 (83) 400 2380 Fax +27 (11) 772 4000 Email alex.thomson@za.ey.com Customer Advisory Actuarial Advisory Services Janet Opolot Senior Manager Tel +27 (0) 11 772 5309 Mobile +27(0) 76 413 2173 Fax +27 (0)11 772 4396 Email janet.opolot@za.ey.com Jarryd Semple Assistant Manager Tel: +27 (11) 502 0689 Mobile: +27 (83) 601 8065 Fax: +27 (11) 772 5685 Email: Jarryd.Semple@za.ey.com 27