Trust, transparency and technology: European customers' perspectives on insurance and innovation

Insurance value propositions usually focus on a product-oriented view. But what do buyers of insurance really value in insurance? By surveying 2,400 customers across six European countries, we found that THE insurance customer and THE customer value do not exist anymore, if they ever did. Insurers who take into account the varied attitudes, values and resulting actions found in today’s markets will have an edge in reaching tomorrow’s customers – and retaining them, despite ever fiercer competition. To achieve this, insurers will need to master trust, transparency and technology.

In the insurance industry, “customer value” is often used as a synonym for “customer equity,” taken to mean the value a person or group brings to the company. Despite all talk about customer centricity, the true sense of customer value – the benefits of a product, service or relationship as perceived by the customer – and its importance to the industry are seldom realized.

In the study “Insurance 2020: Innovating Beyond Old Models,” we described the customer of the future as active, well informed, and willing to reward insurance market players who develop new product designs and models of operation.¹ But how do we know? Where are the indicators that point in this direction?

We asked the customers themselves. Concentrating on six European markets, we surveyed a broad sample of insurance customers on their attitudes, experiences, values and resulting actions toward and with insurance. The results show three success factors that are crucial for the relationship between customer and insurance company: trust, transparency and technology.

Our data clearly shows: the customer does not exist. Customer segmentation based on purely socio-economic criteria only shows part of the picture and a single European marketing strategy is likely to fail. To be successful in the long term, insurers will have to really listen to their markets and take a good look at customers’ attitudes and values.

How customers differ
Customers “think” insurance differently and want to be treated in different ways. Insurers have been trying to cope with this diversity by using specific marketing campaigns to target select customer segments, based mainly on socio-economic parameters like age or income. Our analysis of customer attitudes and values shows: whether someone hunts for the cheapest offer, or looks for convenience and service, or is open to usage-based insurance (UBI) offerings does not depend on demographics, but on his or her specific patterns of attitudes and value perceptions. The overall spread of these patterns is determined by cultural and national differences.

Customers can be grouped into five different segments or types of customers, depending on their general attitudes and value drivers: support-seeking individualists, product optimizers, uninterested minimalists, price-sensitive analyzers or relationship-oriented traditionalists (see Figure 1). Some need an advisor whom they can trust, like the individualists and traditionalists; others primarily look for excellent products (optimizers) or hunt for good prices (analyzers).

These customer types do not just represent the wide range of different value perceptions in the market, they also give a clear indication of the required corresponding success factors for the value propositions insurers should supply. The meaning and use of each single success factor – trust, transparency and technology – differ by customer type.

Looking forward: The next steps
Despite globalization, the customers of the future remain nationally diverse and multi-dimensional. On one hand, single strategies for insurers are not likely to work; on the other, this will provide opportunities for many market players to operate profitably. We can show some traits that should be developed today to succeed in tomorrow’s customer-centric environment:

• Flexibility: No matter what customer type or mix an insurer intends to target, the underlying ability to tailor products, processes and organization to that clientele’s specific needs is essential. Start early; increasing flexibility is a long process.
• Personalization: Customers need to feel that they matter, so insurers should create meaningful touch points to generate positive experience. 
• Experimentation: In all industries, successful companies are those that are willing and able to think “out of the box.” The very definition of experimentation is “to do something to see what happens.”
• Community: The general animosity that people feel toward the insurance industry needs to be actively reduced. To this end, the spectrum of people with common attitudes needs to be explored and each leveraged appropriately.

To read the full report, download the PDF file at the top of this page.

References

¹ Bisker, Jamie and Christian Bieck. “Insurance 2020: Innovating beyond old models.” IBM Institute for Business Value. May 2006.