Prevailing customer perceptions of life insurance do not make for comfortable reading. Indeed, the reactions of consumers surveyed for the latest ReMark Global Consumer Study – as evidenced in developed markets by pejorative citations such as “money-making” and “scam” – are challenging to say the least.
The gap between the industry’s intentions and the customer’s experience exacerbates a lack of customer conviction in the proposition. To close this gap and enhance customer value perceptions, insurers must address four avenues of opportunity – from more engaging, counter-intuitive messaging and the effective application of automated underwriting to product
innovation and investment in wellness and wearables.
A crisis of value and a deficit of trust
What the study makes abundantly clear is that industry-generated demand creation efforts, such as the relentless emphasis on protection gaps, simply have not resonated with customers (See Figure 1).
A multi-pronged effort is required to correct negative attitudes towards insurance, and insurers must rise to the challenge of convincing four different categories of customers of the relevance of a promise to protect.
- Procrastinators – 10% of customers appreciate the need for cover but have no real sense of urgency compelling them to purchase, despite an exigent proportion having young children or property debt.
- Strugglers – 33% do not own insurance because they believe they cannot afford cover.
- Self-reliants – 16% either felt they had enough savings to cover themselves and their families in the event of death, disability or unemployment, or were willing to accept the risks themselves.
- Innocents – 35% of customers are unaware or ill-informed of the need for life insurance.
The research suggests that each of these consumer categories will be responsive to innovative, tailored messaging at the right time. There is opportunity to enhance value perceptions through communication that speaks to the specific situation of a customer – whether it is a question of impressing a sense of urgency upon the Procrastinators, or enticing Struggler
segments with flexible, personal propositions, or education on pricing.
The value of experience
If the study’s first theme highlights the importance of improving conversion, the second considers the critical role of underwriting in purchase completion. Specifically, the research examines the transformational role an improved application process could have in shaping the customer experience.
The issue boils down to one of conviction – putting customers through the complex questioning process is, to a customer with already marginal conviction, an incitement to question the whole value proposition.
The study highlights two challenges in particular where effective automation is crucial to enhance existing underwriting propositions to focus on customer efficacy, as opposed to just insurer efficiency.
The first challenge is that different customers have different concerns related to medical underwriting, demanding a personally adaptive customer experience to address various concerns within a single proposition (see Figure 2). In this case, next – or rather “near” – generation automation, such as the introduction of Natural Language Processing, affords the promise of dissolving the underwriting process into a genuinely intuitive, intelligent experience.
The second challenge is even more telling. The majority of customers struggle to grasp the rationale behind underwriting: of the 8,000 customers who were asked to define life insurance underwriting, over 30% were unable to provide an answer. Of those who could, only 14% correctly identified underwriting as the process of assessing an applicant’s risk for pricing.
This indicates an urgent need for integrated, digital journeys which explain the role of underwriting – and demonstrate the benefits of it to customers. Engaging customers on what’s “in it” for them could be as simple as providing status updates along the way, or offering a complimentary health report at the end of the process.
Customer-centric solutions are imperative. Failure to leverage technological advances to deliver a customer experience more in line with contemporary expectations will leave the industry vulnerable to disruption and obsolescence.
The product paradox – needing to want; wanting to need
Customer expectations of claims and coverage often differ from reality, and such discrepancies present a serious brand risk for insurers. But, these disconnects between current product sales and customer demands actually make room for innovation.
Rather than falling back on the policy terms and conditions, the industry should cultivate customer confidence by providing more specific and unambiguous policy conditions. For instance, certain customer segments (eg Strugglers and Self-reliants) may, for different reasons, respond positively to price discounts for cancer only products (See Figure 3).
Furthermore, consumer responses reveal a discrepancy between what customers want and what they buy. This conundrum is a result of the complex interplay of many factors, not least price issues, adviser influence and behavioural economics. Solving this conundrum demands deeper insights into the cognitive biases, social influences and emotions shaping these customer perceptions.
As ever, challenges present opportunities. Perhaps the most exciting opportunity in the product paradox is that presented by the disconnect between insurer and customer attitudes towards bundling. At a global level, integration of life and health insurance is more popular than integration of insurance with mortgages and savings – a customer response which challenges the status quo.
It is exactly this kind of inside-out thinking that epitomises the disparity between the industry’s intellectual perspective on protection products and the customer’s intrinsic perception of value.
Wearing wellness on our sleeve
The confluence of several macro trends – including prolonged life-expectancy, the reclassification of once fatal diseases to chronic conditions, and a shift from public to private coverage of healthcare costs – has created a consumer environment conducive to health-related innovation.
In conjunction with these trends, the increasing sophistication of the Internet of Things means that preventative, diagnostic and holistic health services can be driven by the device on our wrists. Over 15% of customers surveyed own a wearable device, and most market research projects considerable growth over the next few years. Packaging this novel “quantified self” experience within life propositions has obvious benefits for customer value perceptions.
The live data that can now be harvested for deeper insights could allow the development of more personalised solutions while offering the potential for an evolution in underwriting capacity and the ability to influence claims outcomes. Most encouraging in this context is the willingness expressed by consumers in emerging markets such as China, Indonesia and Malaysia to share wellness data with insurers (See Figure 4).
Globally, buy-in for wellness initiatives is concentrated amongst customers who believe they have above-average health. For the industry, however, there is more value in targeting and engaging the less healthy as it could potentially deliver significantly better claims outcomes.
While participation strategies are yet to be distilled, it is clear the question is not whether, but how to invest. Asia stands out in particular as having strong customer demand for health-related product innovation.
Bridging the gap with better engagement
It is clear there is a long way to go to overcome the challenges the industry faces: while most customers will probably never want life insurance, the industry must work harder to make customers feel the need for protection.
You can’t always get what you want demonstrates that it is high time the industry moved away from hackneyed protection gaps and started addressing the engagement gap. It is through meaningful, more frequent engagement that insurers are most likely to restore customer conviction in the promise to protect.
Mr Stephen Collins is CEO of ReMark International and Head of Global Distribution Solutions SCOR Global Life.