Out of the doldrums! Insurers can master the transformation in the market by consistently aligning themselves with the needs and expectations of customers. However, a Bain survey among more than 2,500 private customers reveals considerable shortcomings. Five factors for success can help suppliers to tackle this.

Disillusionment is rife among Germany's insurance companies! Premium income is stagnating or even in decline, competitive pressure in all business lines is intensifying and the regulatory volume is growing. On top of this, digitalization is hitting the industry with full force. Because of all this, companies will have to carry out a radical restructuring of their business models. The response of many suppliers is to adopt a rigorous savings drive but in doing so they are risking their most valuable assets: their customers.

The number of dissatisfied customers is the most important factor

The consequence of this is that customers are dissatisfied and are more ready to change companies than ever before. Just how (dis)satisfied the German public is with its insurance companies is revealed by a Bain survey of more than 2,500 private customers, which also highlights the main areas of criticism and what creates customer loyalty. The initial result is sobering. The Net Promoter® Score (NPS), applied to all insurers by Bain to measure customer loyalty, stands at minus 8 percent. This means that the number of detractors outweighs the number of promoters, i.e. the especially enthusiastic and loyal customers. However, this does not apply to all companies, nor at all times. Direct insurers, in particular, are relatively successful at fulfilling most of the specific needs of their customers. And enthusiastic customers can also be found in all companies, usually among those who have several contracts. And another result gives cause for hope: The interviewees who had just recently had contact with their suppliers were far more upbeat than others – whether the contact was about a damages report, a contract being signed or just a change of address.

Many customers feel neglected and misunderstood

The survey offers several explanations for the generally disappointing result, despite the massive improvement in the operational excellence of many insurers. Many customers feel abandoned by their insurers: the signing of a contract is frequently followed by years of silence. What's more, many of the insured do not understand how their suppliers are positioned or what they have to offer. In some cases, a considerable gap exists between the actual needs of the insured and the products or services being offered. While customers put fairness at the top of their list of expectations alongside personal support and caring service at every interaction, suppliers tend to focus more on cheaper tariffs and lean structures. As a result of the sights being "incorrectly set", customer expectations remain unfulfilled, which in turn causes their dissatisfaction to grow. The economic consequences of this are enormous since it is the proponents who own more products, remain more loyal and are more likely to recommend their insurers.

Five success factors to instill greater enthusiasm again into the insured

To close the gap between operational excellence and measurable dissatisfaction, insurance suppliers must learn again how to instill enthusiasm into their existing customer base. By consistently aligning their entire organization with the needs and expectations of customers, customer loyalty may be boosted step by step. This study has identified four success factors for this:

• Clear positioning and emotionalization of the brand
• Maximum customer focus with the aim of instilling enthusiasm into the insured with every interaction
• Integration of the online and offline world by means of a consistent omni-channel approach
• Strengthening of exclusive distribution and guaranteeing sustainability
• Mobilization and training of the company's internal and external sales force

Alongside all these factors, insurers must be aware of a fundamental transformation taking place in customer behavior. In the Bain survey, a good 60 percent of the public claimed that in the future the internet would be the most important channel of interaction with an insurance company. This applies to the insured's entire life cycle, from the provision of advice to the moment the contract is signed, from the reporting to the final settlement of an insurance claim. However, the advance of digital platforms by no means reduces the need for individual support since, for 72 percent of the interviewees, personal advice is of importance or of major importance.

The enormous value of agencies and other intermediaries

Against this backdrop, the system of exclusive distribution will experience a renaissance in the years ahead. However, agencies need to be better woven into the structures of insurers in order to fulfill the customer's desire for virtual yet personal support. And the intermediaries will also have to acknowledge that they will no longer be allowed to operate in isolation in an environment of this kind and that they will have to offer their customers a broad spectrum of online services in addition to empathic, on-the-spot service. New opportunities are also arising for other distribution forms, such as the brokers, as they too can profit from the proximity to the customer and the demand for personal support. For the insurers, all the external distribution channels will have to be used as an ear to the customer and will have to be deployed as specifically and as effectively as possible.

The symbiosis between insurers and agencies or brokers will continue to exist in the digital age. Customer relations will continue to revolve around the local intermediaries. Both – i.e. external and internal – workforces must bring the customer back into the spotlight in order to strengthen customer loyalty. For this to happen, the support, the services and the processes need to be consistently aligned with customer needs. In the process of doing this, the insurers must scrupulously measure customer loyalty and define learning and changing processes on the basis of this. The greater the satisfaction among the existing customers, the lower the risk of customers wanting to change and of background conditions altering. At the end of the day, the German customers will continue to seek protection against accident, illness, litigation and life’s other unpredictabilities.

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