Those in the insurance sector are increasingly looking to extend their range of financial product offerings. Some are now offering ISAs, loans, bank accounts, mortgages and pensions as well as insurance. This means general insurers are increasingly competing with banks and building societies in the wealth management market. However, the unfortunate fact is that, in general, insurers are not well placed to successfully position themselves in this market.
More and more banks and other retail financial services organisations are offering wealth management services to mass affluent clients. These clients are given advice on their personal financial planning, including investments, insurance and other products.
Typically these are sophisticated buyers with a propensity to always seek out the best deals, making it harder for providers to develop strong long-term relationships with them.
Banks and other retail financial organisations have responded to the high churn of customers in this market by providing a wider range of products to try to enhance customer loyalty and maximise cross-selling, becoming a ‘one stop shop' for all a customer's financial needs. However, insurers have been slower on the uptake in terms of this type of diversification.
Lack of online presence
TCA Consulting has examined the readiness of retail financial services organisations to provide multi-channel, multi-product ‘wealth management' services.
The sample in the first survey, carried out in May, was composed of 61 retail financial institutions, including insurers, major high street clearing banks, dedicated online banks, share dealing companies, and credit card suppliers.
The study was carried out across five separate channels: branch, call centre, WAP, ATM and the internet.
Unfortunately for insurers, this research shows that, in general, the sector is poor at offering consumers a broad enough range of products or contact channels.
The study demonstrated that only 15% of their products are available online. Banks, on the other hand, offer a much more comprehensive range of services, utilising more channels and offering more products.
As well as supporting a limited number of channels, it seems that insurers are also not making the most of what services they do offer, particularly internet services.
For example, many are using the web to provide information-only services, pointing consumers to products available on the telephone, rather than providing the capability to purchase these products online.
Some insurers seem to be satisfied with these very limited internet services. For example, a number think that it is sufficient to provide online application forms which are processed manually in the traditional manner. The consequent response times do not match customers' expectations of the speed which an internet service should operate at.
Overall, the attitude of insurers towards the web is summed up by the fact that of the insurers surveyed, who included such household names as Britannic Assurance, AXA and Royal Sunalliance, only one provided all the same services online as provided via the telephone.
While they may wish to get into wealth management, or at least sell a wider range of financial products, many insurance providers clearly do not have the capability to offer a complete financial service. However, partnerships and joint ventures could allow them to progress towards these goals.
Some of the traditional relationships we have seen between broker, insurer and brand owner will change as we see a different emphasis on customer ownership, an increase in managed services, outsourcing, aggregation of products and portfolios.
But it is hard to imagine some of the more traditional entities managing this step-change in business practice in one go. If insurers are going to succeed in diversifying and selling ISAs or pensions as well as insurance, let alone if they are to convince the mass affluent to come to them for an all-embracing wealth management service, their attitudes will have to change fundamentally.
Banks are taking the internet, as well as smaller, but growing, channels such as WAP and internet TV, much more seriously and exploiting them by combining products and services according to customer needs.
If they are going to compete in this wider market, insurers will have to emulate banks' technological preparedness and innovative, individualised tailoring of products and services.
Jaded customers
Only by combining multiple products and services with convenient contact points will insurers be able to attract larger numbers of customers to their non-traditional products. This is even truer when it comes to the task of getting mass affluent customers to turn to them as the lynchpin of their financial management.
Insurers clearly face some significant challenges in their attempts to diversify, but, on the other hand, if they do take the necessary steps to improve their channel and product spread, many have strong enough brands and reputations to succeed in extending their traditional services and even to excel in the wealth management market.
Perhaps the best chance of success for many will lie in looking to specialise – potentially by looking to develop new partnerships with other retail financial services organisations – and match the selective needs of a highly focused customer segment within this sector.
But even those who do not choose to set themselves up as wealth management providers will do well to remember the importance of improving their range products and contact points to avoid relationships with their customers weakening and becoming jaded.
