The factors influencing customer loyalty are changing, demanding that insurers rethink and realign how their businesses meet customer expectations, notes a new thought leadership report released Thursday by Majesco.
A significant gap exists between consumer needs and expectations and what they are provided, suggests The Rise of the New Insurance Customers: Shifting Views and Expectations… Is Your Business Ready for Them?
Findings are based on an online survey involving responses from 607 individuals in the United States aged 18 or older and who make or share household decisions.
The research was conducted as a part of a larger Majesco research platform that encompasses dozens of industry trends and hundreds of impact points.
It “exposes the vulnerable positions of personal property and casualty (P&C) and individual life and annuity (L&A) insurers compared to consumer opinions of other businesses and the rapidly shifting needs and expectations of the emerging dominant generation of insurance customer,” notes a statement from New Jersey-based Majesco.
“Insurers must rethink and realign their business with the needs and expectations of customers in next 10 to 20 years rather than the past 10 to 20 years,” reports the company, a global provider of core insurance software, consulting and services.
Any gap that exists is expected to grow as younger generations – and their expectations of what constitutes customer service from insurers – represent increasingly more of the market.
Failing to fill that gap puts market leadership and revenue at risk, leaving customers to select insurers that best meet their needs and expectations, the report states. “In North America for both P&C and L&A insurers combined, this puts $1.4 trillion of premium at risk,” it notes, citing figures from Swiss Re.
“The generational gap reflects an insurance industry steeped in tradition, where business models, business processes, channels and products are becoming rapidly irrelevant for the younger generations,” argues Majesco.
While the Baby Boomer generations may have adapted and are generally content with the current insurance business and customer journey, that is not the case for Millennials, Gen Z and Gen X, says Denise Garth, the company’s senior vice president of strategic marketing, industry relations and innovation.
“Led by Millennials, Gen Z and increasingly Gen X who sits between them and the older generation, their needs and expectations are rapidly shifting to new products and services, new channels and a robust, intuitive digital experience,” Garth says.
“Loyalty is now influenced by how well insurers meet their needs and expectations for products, engagement and value, opening the door to new competitors and the potential shift in market leadership over the next five to 10 years as these generations overtake the previous ones,” she cautions.
Assessing consumer perceptions across 10 common industries younger generations do business with regularly – including insurance – insurance scored dead last in terms of “easy to do business with,” the report shows.
“At the same time, P&C insurers are increasingly challenged with the emergence of aggregators, comparison sites, alternative channels and new entrants that are redefining products, processes and engagement,” it points out.
Rankings of how easy it is to research, buy and obtain service from product service providers
In terms of ease of use, “older generations are more likely to perceive insurance is easy to do business with, likely due to the traditional business models, products and agent channel that they are accustomed to,” notes the report.
“Gen Z, the digitally born generation, is the least satisfied with Millennials next, which does not bode well for insurers who are attempting to capture this next generation of customers,” it adds.
The research further found that of 11 key insurance industry-held perceptions about insurance customers, five are outdated, five are shifting and one remains relevant.
“The research dives into this shift with more insights on the move to digital, expected by Millennials and Gen Z, but also highlights that Gen X is often dramatically aligning with Millennials and Gen Z,” notes the company statement.
“Instead of transforming the insurance business using age-old assumptions and traditional business approaches, insurers must look to reinvent the business model to operate and succeed in a new business paradigm,” it contends.
The resulting new business paradigm “will hold onto the business components that work in the new context of people, technology and market boundaries, but it will discard the pieces that are outmoded or irrelevant,” the report recommends.
Understanding three key factors – people, technology and market boundaries – will help build a business that is “moving from product- to customer-driven, process and transaction focus to digital engagement focus, mass standardization to personalized offerings, agent channel to multi-channel, subscription-based insurance to event or point-in-time insurance, claims payout to claims avoidance and prevention, and internally focused business model to an ecosystem-focused business model.”
Brokers and agents continue to dominate as the channel of choice in buying personal insurance, the report states, but cautions that new channels are gaining a toehold.
“Over 17% of respondents indicate they have bought auto insurance from a comparison site, financial advisor or bank representative. In addition, nearly 10% of all consumers bought health insurance through an exchange, with Gen Z the largest purchasers at nearly 25%,” Majesco notes.
The research “uncovered a strong consumer interest in using alternative channels and products in the near future,” the report states.
“Most notable was the overwhelming interest of 40%-60% by Millennials and Gen Z in bundling of insurance in the purchase of the car, home or other items, as well as buying services to prevent accidents or claims,” it adds.
Interest in alternative forms of insurance
The use of new capabilities – such as fitness trackers, ride sharing services and ApplePay or something similar or purchased some insurance from a website – “will likely continue to gain momentum and are early indicators of emerging new needs and expectations of consumers,” the report notes.
The ability to get advice or service continues to be important, but that can be from a live person (80%) or an insurer’s website or mobile app (almost 60%), likely reflecting the complexity of current insurance products, it points out.
Sources of information used for researching prior to buying or renewing
“For purchasing insurance, personal and live interaction with agents, phone and or the insurance company represented nearly 65% of responses,” the report states.
“However, the top renewal choice at nearly 20% was the insurance company and website, representing the shift to digital, though the personal and live interaction was next,” it notes.
While traditional sources and methods/channels remain dominant for buying and renewing insurance products, “almost 40% indicate they would be likely to try non-traditional ways of obtaining insurance in the next three to five years,” Majesco reports,
“As consumers gravitate beyond traditional options, they will rapidly explore and seek alternatives across a wide spectrum of choices, regardless of whether or not the insurer offers them. Insurers who remain committed to only the agent channel will likely lose out on new customers who will seek alternative channels, placing their growth strategies at risk,” states the report.
Many insurers continue to be “unprepared for the potentially dramatic differences in customer needs and demands that require different products, services, channels and engagement approaches,” it points out.
“Insurers must be alert to the new trends and understand the needs and traits of the customer to better tailor their strategies, products and services to appeal to the new demographics and generational groups,” the report maintains.
More positive, however, was the Majesco finding that shows there is significant potential demand among consumers for new, non-traditional products and services, and new ways to buy and service them.
“A cohesive, consistent and integrated approach across traditional and digital methods and channels can provide a bridge to meet the contrasting needs and expectations of the generational groups by providing the engagement capabilities that are preferred by traditional and new, ‘digital first’ customers,” the report adds.