Briefing: Ryanair’s real product is certainty – insurance can learn from that

This week’s EasyJet equity takeover, agreed for around £5.2bn, got me thinking, oddly, about Ryanair. Two very different offerings with the same no-frills image – one nice, one nasty.

And yet EasyJet is being taken over, falling short of its potential value, while Ryanair’s valuation is up roughly 60% over the last five years.

But what if Ryanair got hold of your current operating model as an insurance firm?

When we think of the airline we think of cost cutting, hollowing out and hyper-unbundling. We tend to gravitate to cost and price. But what if the real genius is actually about setting expectations? 

Price-sensitive short haul air travel is a fascinating industry juxtaposed against our own. Ryanair doesn’t blur its promise with broader or looser terms on top of price. Instead, it narrows the promise – and aggressively manages expectations. 

Perhaps the trick is not to be cost-focused, but behaviourally-focused. If you have been given strongly managed expectations, and you instinctively realise you pay for what you get, why would you be remotely bothered about having to suffer for two or three hours when you know a beach or city break awaits on the other side? 

Brand, service and price. Ryanair cut all three to the bone and is absolutely shameless about it.

We may scoff and, often, the expected experience and service is not good at all. We just know it will likely be cheaper. Our scoff is the airline’s vindication. It just won the behavioural battle before we even got a flight quote.

You get what you pay for

Want to board quicker? With Ryanair, you know you have to pay. Want to put something in your seat pocket for later? Um, there isn’t one.

That luggage square is notoriously stingy and the excess size price is hefty. Ryanair chief executive Michael O’Leary even mooted charging for loo roll. He takes the idea of marginal gains to its antithesis. Marginal pains more like!

So where’s the damage to their value and market share? EasyJet chief executive Stelios Haji-Ioannou cashes out of the nice airline, while O’Leary’s nasty one posts the biggest profit in its history.

Only in that regard does the insurance analogy get a bit iffy. A traveller may realistically expect sunshine and rainbows at the end of their flight, but the insurance customer does not on the other side of their purchase. At worst, a bad thing happens and the coverage pays. 

I’ve reduced question sets and seen conversion go down. Insurance customers and their agents are expecting interrogation. They’ll tell you they don’t want lots of questions, but if you don’t ask a lot of questions, you can’t charge them a higher or more accurate price. Whether it’s a quote engine or a market presentation or proposal, time is quite literally money for us all. 

Of course, many in self-service retail or eTrade are savvy about using a data stream of supplementary information instead of having to ask.

But think about Ryanair – it would shout about that! Are insurance customers aware of all that hard work? When they see a price, they have no idea how we came to it or how much effort went in. While we scoff at the lack of in-flight food, we don’t doubt Ryanair pays for decent planes, fuel and pilots. 

You can see where the non-essential lives on a Ryanair plane because it is plain to the eye.

If you want something remotely nice, you pay. The route to price is visible, explicable and obvious. We can pretend that it doesn’t matter for our sector, but it probably does. 

Our equivalent of paid-for hand luggage rule is a ton of words. Instead of the box at the gate we have to embarrassingly test our bag in, the wording is only drawn on at claim.

The constraint is invisible and, as for the claim itself, customers don’t expect to have one. They’re unlikely to expect the claims process to be like drawing money from an ATM.

Managing expectations

It is through the management of these customer expectations that more commoditised lines in retail could experiment.

Instead of offering one claims service, insurers could offer tiers. We already distinguish products by coverage and price, with the “gold” travel cover being the broadest and most expensive.

Nothing in this, however, speaks to how quickly the customer will be called back or indemnified for a non-emergency claim. Those choices could contain clear and obvious expectation management and allow more competitive pricing. 

Expectation management for the customer’s chosen path could also be set early, at quote stage. Instead of just hoping, or even forcing, the customer to lie that they read the wording, we could incentivise them to.

If you’ve ever invested on a crowdfunding site you’ll know you now have to take an idiot test before you can put any money in. Investors are asked what will happen if their investment goes down and must select the correct option from a multiple choice menu. Simply, the correct answer is not “make money”.

It’s possible that, in the insurance sector, we’re so bored of what we sell that we daren’t even compel the customer to read it and pass a simple multiple choice test for a discount.

As for the sunshine at the end of the flight, if Ryanair did do insurance claims, I like to think that it would at least be smart about renewal prices.

Imagine a customer not claiming on a retail high value product for five years – only to have a claim and then see their renewal price hiked. 

O’Leary is a black and white man. He’d quickly note that the minority of his customers claimed and, if those who did told all their friends that their price did not rise the following year, it would be free PR.

Ryanair wouldn’t view that as a failure of underwriting, or a risk that needed to pay back. The firm would know that, if it raised prices, the person would shop around and leave.

In insurance, we generally want to be seen as EasyJet.

We’re not commoditised and we’re not about price, honest. We’re about claims service and excellent support. Press five to confirm and tell us why you are calling today, oh and did you know you could find out FAQs online?

Give me a break. No, we should not want to be EasyJet. We should be prepared to own the cliche, just as O’Leary has. To emphatically cram that reality onto screens, documents and comms.

This is the compliant and, arguably, commercially savvy way. 

Addressing myths and misconceptions instead of owning them? O’Leary would never. It costs extra fuel.

And maybe it does for us, too.