Most insurance carriers struggle to deliver the kind of consistent service and value that customers are seeking in an increasingly digital world. Andrew Schwedel, a partner in Bain's Financial Services practice, discusses how companies can excel by focusing on flawless execution of core business, offering an ecosystem of services and delivering a customer-centric model.
Read the Bain Report: Customers Know What They Want. Are Insurers Listening?
Read the transcript below.
ANDREW SCHWEDEL: Insurance customers have pretty simple needs. They want a good variety of products at reasonable prices, and they want a simple, hassle-free experience. In spite of these needs, we found that most companies are not really serving those customers that well today.
We just completed our fourth annual global insurance loyalty survey, looking at 174,000 customers across 18 countries. And we find, again, fairly little differentiation among carriers. There are a few mostly mutual companies around the world that have tended to outperform by 10 or 20 points year in and year out. But by and large, most insurance companies are competing largely on price, and view the business—and the customers view it—as a fairly commoditized business. And this has left the insurance companies vulnerable to attack from a variety—an increasing variety—of insurgents.
One of the interesting findings in this year's report was that anywhere from 50% to 100% of customers around the world are open to buying insurance from a player outside the industry. Increasingly, that's a big tech company. In the US, we found 60% of all customers and 80% of millennials are open to buying coverage from outside the industry. And this is, in part, due to the increasing importance of digital.
We see digital—and especially mobile—usage exploding year over year. In the US, it was up over 70%—mobile usage up over 70%. In China, the majority of customers are now interacting with their insurance company on a mobile channel. And insurance companies have invested in the mobile and digital experience, but they haven't really re-engineered all their processes. They haven't simplified the processes and the products. And it just doesn't work in the way the customers have grown used to outside the insurance industry.
So what must insurance companies do to really respond to the threat? Three things. The first is to just ensure that they're excelling at the core basic business: high-quality products that work, delivery that is effective and flawless every time. But the second thing is to try to find ways to deepen and extend relationships with customers, and we call this a set of ecosystem services.
Insurance is and remains a fairly low-touch business. But increasingly, we see carriers finding ways to interact more with customers, offering roadside assistance, health alerts, discounts on additional services around the product. And these things can help, if done well, deepen relationships and increase loyalty. And the third thing is really to build an innovation engine and make that a core part of the company's DNA, really starting with a customer-first mindset.