Personal lines insurance is very price sensitive. As discussed earlier, maintaining a 20+% cost margin. it doesn't happen to insurers. Besides pricing, what really drives customer loyalty, and how can insurers compete to increase their market share?
In this blog, I explore strategies for improving customer loyalty and retention, offer predictions about the changing risk landscape of auto and home insurance, and discuss Accenture's predictions for how insurance buying behavior may change over the next decade.
The changing landscape of personal lines risk
Personal lines insurance has evolved from a niche product to a digital asset. Originally a manual trade, it is now a digital product that trades globally. With nearly four billion cars and homes worldwide, personal lines insurance is a global asset and an ever-changing risk.
The nature of the risk varies greatly between auto and home insurance. Car insurance covers the same risk profile with nearly 600 common car models around the world. The rise of electric and autonomous vehicles is reshaping traffic laws and vehicle maintenance procedures and introducing new risks that require product liability and cyber coverage.
In contrast, home insurance covers a diverse risk profile with countless types of homes and construction levels. Domestic risk is greatly affected by severe weather affecting both the frequency and severity of damage. It is fair to predict that extreme weather will not only affect rates, but also building codes will provide more flexibility to price it.
While home and auto insurance represent important areas of personal lines insurance, consumers have also experienced the impact of major disruptions – the volatile economic climate, the residual effects of the COVID-19 pandemic and the ongoing technological revolution have all significantly changed the dynamics of the world. . Today, the consumer's perceived need for insurance is high, and the risk areas that concern them the most are changing. We found that the rising cost of living and climate change were the top two areas where consumers felt concerned about risks but also less protected.
Generational shifts in purchasing insurance
Major insurance consumers are changing. Millennials, the first generation of digital natives, are entering their prime insurance buying years. Insurers must meet the unique needs of this type of population. Across all demographics, there is a need for more, better, and faster services. Consumers want their unique needs met quickly and easily and are willing to share their data for a better physical and product experience.
Strategic areas for improving the value proposition
- Brand identity in customer interactions: Ensure brand identity is evident in all customer interactions, creating a consistent and visible brand experience across all touch points.
- AI-augmented workers: Instead of focusing on implementing AI solutions, focus on augmenting employees with AI to provide personalized and empathetic interactions, ensuring that customers feel deeply understood. This is a nice, but sensitive nuance.
- An exciting digital experience: Create digital experiences that encourage emotional connection. For example, in travel insurance, providing dynamic updates of severe weather, top tourist attractions, and local health advice can greatly improve customer engagement. Traditional risk mitigation messages do not encourage an emotional connection with the customer.
- The real benefits of digital adoption: Ensure that customers see the tangible benefits of adopting digital channels, such as faster turnaround times and more personalized digital interactions, which make digital transformation worthwhile.
Creating a compelling digital experience for customers is key to improving customer loyalty. Recently, we worked with an insurance company to address low interactions between agents and customers, inadequate customer information, and a lack of visibility into lead management. Insurance and Accenture have introduced an AI-enabled application to their clients; the app was incredibly intuitive and built using a design that is gaining market acceptance across Asia. The solution provided automated customer relationship management, marketing content recommendations, best practice recommendations, customer insights, 360 degree customer insights, and agent performance management.
The results? 424% premium growth and 671% pipeline generated, proving that a compelling digital experience is worth its weight in gold.
A shift in consumer buying channels
Traditional methods of purchasing insurance through brokers and agents are expected to decline in favor of direct sales and embedded insurance models. Munich RE said embedded insurance is expected to grow at a CAGR of 25% until 2030, potentially accounting for more than US$500 billion in written premiums worldwide by 2030 in P&C lines.
Consumers are showing increasing interest in the provision of embedded insurance, where appropriate risk protection is integrated into their purchase. For example, the share of consumers likely to purchase auto insurance from a car dealer increased from 32% to 42% as of 2018. Consumers are also looking for solutions beyond traditional home and auto insurance coverage, such as comprehensive home buying services and home monitoring services.
Focus on insurance areas
- Performance and efficiency: Develop better features and products.
- Experience and convenience: Delight customers with exceptional service.
- Solving, not selling: Play a relevant role in customers' lives while creating value for all.
As the insurance landscape evolves, we must continue to harness the power of AI to turn challenges into opportunities. By empowering businesses with AI-driven solutions, we don't just create tools – we turn opportunities into measurable success. On this journey of innovation, we are redefining what is possible, ensuring that the future of insurance is not just anticipated – it is paid for in action.
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