Like it or not, the internet provides the most familiar way for people to buy insurance. We should not be afraid to make it work for us too
Somerset Maugham once said: “Old age is ready to undertake tasks that youth shirked because they would take too long.” Today’s impatience of youth has been accelerated by technology to become unrecognisable. Even a wait of a few seconds to see something online is deemed far too long. This means generation Y is reaching its 20s and 30s with a very different attitude to business. The insurance industry needs to take a long, hard look at how it adapts to this.
The first thing any new buyer of business or personal insurance will focus on is cost. But insurance pricing has reached critically low levels and insurer profitability is under huge pressure, leaving little room for further price cuts. With less scope to use price as a differentiator, the potential in the commercial space for online aggregators – now a standard tool for personal lines – should offer questionable value to those seeking specialised commercial insurance.
For businesses of all sizes, there is only so far you can go with an off-the-shelf product offering limited cover at a limited price, before the need to look beyond pricing becomes apparent. Understanding an insurer’s security, claims paying ability and practice, terms and conditions, gaps in cover and additional services such as risk management become key.
Online tools make it difficult to analyse in detail what is being offered. Given the subtleties of many benefits offered by insurers, and the similar look and feel of policies, how can providers make insurance buyers or intermediaries aware of the distinctions between service and products?
Insurers must do their bit to communicate the benefits of having a relationship with them. And if the industry does not want to appear as an amorphous mass, it needs to put more effort into differentiation. To truly engage the customer market, insurance firms must strive to show how they are different.
The role of the broker is crucial. This feature of the insurance-buying process explains why, contrary to earlier warnings of disintermediation, the client-broker-insurer relationship is still intact in the commercial market.
Today’s generation recognises a good deal, and logically it should involve a broker to help find the best solution. But how can the broker offer such service in a cost-effective way?
The answer lies in a return to established values combined with an embrace of new technology. We need to have a much better understanding of the customers and their insurance needs, and find ways to direct them to policies that meet their complex requirements by using a delivery medium they are familiar with.
Commoditising insurance products may be the answer for some, but not for most. This is not just about marketing and advertising (although that may be a small part of it); it is far more about why one firm’s offering is superior to another.
I am not advocating wholesale change for change’s sake – that would be confusing. The industry needs to refocus on where it is genuinely adding value and use this as the key point of differentiation. This should then be offered to clients in a format they find easiest to negotiate – and, like it or not, that is increasingly online.
Focusing on clients’ needs can only be good for both insurers and brokers. Delivering a service at a tenable price and in an electronic format should lead to big cost savings and reduce some of the pricing pressures that are such a feature of the modern insurance market. IT
Terry Whittaker is managing director, distribution, QBE European Operations.