LONDON, Sept. 14, 2017 (GLOBE NEWSWIRE) -- Insurers find it increasingly challenging to differentiate themselves in the eyes of their customers. In response, some innovative insurers are adopting a radically new approach – looking beyond their standard insurance products and offering an ecosystem of value-added services that provides consumers with a one-stop shop to address their broader needs. This allows insurers to overcome the low-touch nature of their industry, creating opportunities for more frequent interactions with customers, which has a remarkable correlation to customer loyalty.
Working with Research Now, Bain & Company surveyed more than 170,000 insurance policyholders in 20 countries to gauge how loyal they are to their carriers. This year’s insurance loyalty report, Customer Behavior and Loyalty in Insurance: Global Edition 2017, revealed a significant trend: the growth of purchaser interest in ecosystem services. Insurers are discovering new ways to build loyalty by offering their customers an interconnected array of services that extend beyond insurance. Of those interested in ecosystems, nearly 90 percent of respondents in China, 61 percent in the UK and just over half in Australia said they would be willing to switch providers if their desired services were offered – an indication of the extent to which these services have the power to attract new customers.
“We are seeing a growing polarization in the insurance sector between low-cost providers on one end, those who are redefining the very nature of what it means to be an insurers on the other, and commoditized players in the middle,” said Henrik Naujoks, who leads Bain’s insurance work globally. “While the ecosystem approach may not be a good fit for every insurer, those that do want to become the central player, must move fast and decisively to fend off the competition.”
Customers using ecosystem services said they are willing to pay higher premiums if ecosystems services are included – a strong sign that companies can use an ecosystem strategy to break free from the commoditization trap. Bain found that within the price competitive automotive insurance sector, up to 60 percent of survey respondents would be willing to pay more for additional services.
Additionally, Bain found that many of these ecosystem services help people live healthier and safer lives, which, not coincidentally, can lead to fewer insurance claims and potentially boost insurers’ profitability.
What Customers Want
The Bain survey shows that insurance customers around the world have clear, and strikingly similar, preferences when it comes to ecosystem services: they’re looking for safety, prevention, convenience, and rewards for good behavior.
However, the ecosystem concept is still in its infancy, especially in most developed markets – an average of fewer than less than 10 percent of customers said they have used more than three ecosystem services.
Those who do use these services are overwhelmingly pleased. Across markets, the Net Promoter Score™ – a measure of customer loyalty – of satisfied users is, on average, 50 percent higher than for those who are not offered any services. This is particularly true in Asian markets, especially Japan and China, where the loyalty gap is as high as 60 percentage points. However, careful selection of services, the right partners, and a convenient customer interface are critical to avoid disappointments.
Building the Ecosystem
As they get ready to venture into the ecosystem, insurers will face a series of critical, and often challenging, decisions. Bain’s experience shows that these strategic choices are best tackled early on, beginning with a three-pronged strategic approach:
- Define your role in the ecosystem. Given your specific position in the market, what are the opportunities to establish an ecosystem? Do you want to be a sole owner or a co-owner of the system, or would it make more sense to be a supplier, with no ownership stake? Would joining with a partner such as a technology company, retailer or big data provider bring benefits such as a new pool of customers or fresh data and insights?
- Select your target customers. Do you want to focus on your base of existing policyholders or do you open your services and ecosystem fully or partially to prospects that are currently not and may never be policyholders?
- Create clarity on how to make money. Do you expect ecosystem offerings to cover their costs? Do you want them to generate a separate revenue stream? Determine what the economics of the ecosystem should look like for your company, customers, and partners – at the outset and over time.
“The industry has historically been slow-moving, but that doesn’t mean that things are not changing,” said Naujoks. “Companies that succeed in the future will be those that successfully redefine the very nature of what it means to be an insurer.”
Editor’s note: To receive a copy of the report or arrange an interview, contact: Aliza Medina at aliza.medina@bain.com or +44 20-7969-6480
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