Established insurers aren’t doing a very good job of delivering value to their younger customers. That’s one of the major findings of Bain & Company’s survey of more than 174,000 retail insurance customers in 18 countries, including 3,000 customers in Indonesia.
As part of our Customer Behavior and Loyalty in Insurance report, we asked customers to rank the qualities they value most in a provider.
Insurers are falling short on providing value to customers of all ages, but the gap is most pronounced among digitally active millennials — people who expect instant, personalized service on their smartphones and tablets. That raises the question of how fit insurers are for the future.
That question has some urgency in Indonesia. Digital adoption is rising rapidly in the country, especially among millennials. The share of digitally active life insurance customers increased from 46 percent in 2014 to 73 percent in 2018. More than 60 percent of younger Indonesian life insurance customers used their mobile phones for research and/or interactions in 2018.
Insurers are challenged when it comes to connecting with their digital customers. In Indonesia and elsewhere, most customers who interact with insurers only through digital channels give their carriers lower loyalty scores than those who use only non-digital channels.
Generally speaking, insurance customers have a few fundamental needs. They want to be able to choose from a good selection of policies at reasonable prices. They want clear, transparent information, and they want smooth, hassle-free interactions. When they’re filing a claim after an incident — often a time of great stress — they expect their insurers to help alleviate their anxiety, not add to it. Increasingly, insurance customers also want their carriers to provide noninsurance services, such as roadside assistance and advice on leading healthy lives.
In addition to the basics, insurance customers are seeking a sense of community and purpose. Indonesian customers value higher-level elements such as “self-actualization” and “nostalgia”.
Young people want all these things — and more. And they’re not happy with what they’re getting. Fewer than 10 percent of millennials in Indonesia give their property-and-casualty providers high scores for key upper-level elements, such as “motivation”, “affiliation and belonging” and “self-transcendence.”
Incumbent insurers are grappling with this value deficit at the same time as they’re facing the kind of digital disruption that has roiled many other industries, from retail to travel to banking. No insurgent has achieved the critical mass necessary to become a power player in a major insurance market — there’s no Apple or Google of insurance on the horizon, at least not yet — but aggregator sites, insurtechs and other newcomers are making significant inroads, particularly among younger customers.
In all but one of the countries we surveyed, a majority of customers are open to buying insurance from new entrants, including those from outside the industry, such as tech companies, car manufacturers or retailers. Among digitally active millennials, that figure can soar to 90 percent or higher. In Indonesia, it’s 93 percent.
Insurers know they have a problem, and many are taking steps to address it.
Some insurers are trying to disrupt themselves by creating a company-within-a-company that aims to be digitally oriented, low-cost and customer-centric. Allianz Indonesia, for example, recently launched Allianz Innovation Lab, an initiative that will use Agile techniques to create new products more rapidly.
The jury is still out on most of these efforts, but insurers are learning that they can’t just put a low-cost, digital veneer on old-school products and processes. They need to radically reimagine their approach.
Our survey shows that the insurers with the highest loyalty ratings stand out in a few key areas, helping them keep up with evolving customer needs and stay a step ahead of insurgents.
Loyalty leaders excel in their core business. They deliver high-quality products at competitive prices and provide customers experiences that are personalized and simple, both online and offline. The companies pay particular attention to the “moments of truth”, such as those times when policyholders need support after an accident, injury, fire or theft.
Insurance leaders go beyond insurance. They establish themselves as central players in an ecosystem of interconnected services that attract customers and build loyalty. Insurers that offer ecosystem services are able to connect with consumers on emotional and life-changing elements — the ones prized by millennials.
Insurance leaders innovate — constantly. Insurance is a highly regulated industry, creating barriers to entry. But, as disruptors have shown in other sectors, such obstacles can be overcome. Incumbent insurers can’t afford to be complacent.
Leading insurers start by revamping fundamental activities, including making processes more efficient and improving customer service. Some companies are creating new business models, including digital-first platforms, sometimes as standalone units. The most proactive insurers are taking innovation even further by radically reinventing their entire business, not just discrete pieces.
Insurers that do the hard work of understanding and delivering the value that matters most to all their customers — including the smartphone-wielding consumers of the next generation — can put themselves on a path to sustained loyalty and lasting growth. Their future is on the line.
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