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Retail insurers have a problem: Their customers don’t appreciate them and don’t stay with them. Companies end up competing largely on price, and that can lead to a downward spiral of cost-cutting, profit erosion and customer churn.
Some leading insurers have figured out how to break out of this destructive cycle of commoditization. In what may look like a paradox, these companies are winning in insurance by offering their customers services beyond insurance. They’re helping their customers live safer, healthier and more productive lives by providing them with a constellation of noninsurance services known as an ecosystem.
When insurers offer ecosystem services, they increase the frequency of customer interactions. And engaged customers are much more likely to be loyal customers. In the US, for example, home insurance customers whose carriers offer three or more ecosystem services give their companies loyalty scores more than twice as high as those customers whose carriers offer no ecosystem services.
Similar trends exist across the globe and across different ecosystems (auto, home, health and life insurance), according to Bain & Company’s survey of more than 172,000 property and casualty and life insurance customers in 20 countries (see Customer Behavior and Loyalty in Insurance: Global Edition 2017).
Among US home insurance customers interested in ecosystem services, 42% are willing to switch insurers if their own carrier doesn’t provide them. And more than one-third of US home insurance customers who use ecosystem services say they’re prepared to pay higher premiums to insurers that offer these services—another powerful sign that ecosystems can help insurers break the cycle of commoditization.
Henrik Naujoks is a partner in Bain & Company’s Zurich office and leads the firm’s Financial Services practice in Europe, the Middle East and Africa. Harshveer Singh and Darci Darnell are Financial Services partners based, respectively, in Singapore and Chicago.
First published in September 2017