Personal insurance is very price sensitive. As mentioned above, Maintain an expense ratio of 20% or more It’s not feasible for insurance companies. Besides pricing, what really fosters customer loyalty, and how can insurance companies compete for a larger market share?
In this blog, we explore strategies to increase customer loyalty and retention, forecast the changing risk landscape for auto and home insurance, and discuss Accenture’s predictions for how personal insurance buying behavior will change over the next decade.
The changing risk environment for personal lines insurance
Personal insurance has evolved from a professional to a digital product, initially traded manually, to now being a globally traded digital product. With approximately 4 billion cars and homes on the planet, personal insurance is both a global product and an ever-changing risk.
Auto and home insurance present very different risk landscapes. Auto insurance covers a uniform risk profile across approximately 600 common vehicle models worldwide. The rise of electric and autonomous vehicles is reshaping road regulations and vehicle repair processes, creating new risks that require product liability and cyber insurance.
Conversely, home insurance covers a diverse risk profile, including countless types of homes and building codes. The underlying risk to homes is heavily driven by extreme weather events, which impact both the frequency and severity of losses. It is reasonable to expect that extreme weather events will impact not only valuations, but also building codes, which introduce additional variables into pricing.
Home and auto insurance are key areas of personal insurance, but consumers are also dealing with the effects of massive disruption. A volatile economic environment, the lingering effects of the COVID-19 pandemic, and the ongoing technological revolution have all significantly altered how the world works. Today, consumers have a high need for insurance, and the areas of risk they are most concerned about have shifted. Rising costs of living and climate change are two of the biggest areas of concern for consumers. They are most aware of the risks, yet are the least protected.
A generational shift in buying insurance
The core insurance consumer is changing. Millennials, the first generation of digital natives, are peak insurance buyers. Insurers must meet the unique needs of this generation. Every generation demands more, better, and faster service. Consumers want their unique needs met quickly and easily, and they are willing to share their data in exchange for better experiences and products.
Strategic areas to strengthen your value proposition
- Brand identity in customer interactions: Ensure your brand identity is clearly communicated in every customer interaction, creating a consistent, recognizable brand experience across all touchpoints.
- AI-powered employees: Instead of focusing on implementing AI solutions, strive to empower your workforce with AI to deliver more personalized, empathetic interactions so customers feel deeply understood. This is great, but it’s an important nuance.
- Engaging Digital Experiences: Create digital experiences that foster emotional connections. For example, a travel insurance company can significantly increase customer engagement by providing dynamic updates on extreme weather, popular tourist attractions, and local health advisories. Traditional risk mitigation notifications don’t foster an emotional connection with customers.
- The real benefits of digital adoption: Help customers see the tangible benefits of adopting digital channels, such as significantly faster resolution times and personalized digital interactions, making the move to digital worthwhile.
Creating compelling digital experiences for customers is key to increasing customer loyalty. Recently, we worked with an insurance company to address low agent-customer engagement, lack of customer information, and lack of visibility into lead management. The insurance company and Accenture deployed an AI-enabled app to the client that was highly intuitive and built with a scalable design for market adoption across Asia. The solution provided automated customer relationship management, marketing content recommendations, next-best-action recommendations, customer insights, 360-degree customer insights, and agent performance management.
The result was a 424% increase in premiums and 671% more pipeline generated, proving that engaging digital experiences are extremely valuable.
Changes in consumer purchasing channels
The traditional way of purchasing insurance through a broker or agent is expected to decline, replaced by direct sales and embedded insurance models. Munich RE Embedded insurance is projected to grow at a 25% CAGR through 2030, by which time global P&C lines gross written premiums could exceed US$500 billion.
Consumers are increasingly interested in embedded insurance offers, where relevant risk protection is built into the purchase. For example, the percentage of consumers who are likely to buy auto insurance from a car dealer is 32% to 42% since 2018Consumers are also looking for solutions beyond the traditional home and auto insurance bundle, such as comprehensive home buying and home monitoring services.
Insurance companies’ focus areas
- Performance and Efficiency: Develop the best features and products.
- Experience and convenience: Delight your customers with exceptional service.
- Don’t sell, solve: Playing a vital role in our customers’ lives while creating value for everyone.
As the insurance landscape changes, we must continue to harness the power of AI to transform challenges into opportunities. By empowering enterprises with AI-driven solutions, we don’t just create tools, we turn possibilities into measurable successes. In this innovation journey, we will redefine what’s possible and ensure that the future of insurance is not just predicted, but actively shaped.
