What high-performance insurers are doing to achieve growth in a dormant market - The Digital Insurer: Accenture US P&C Insurance Consumer Survey
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The Digital Insurer: Accenture US P&C Insurance Consumer Survey What high-performance insurers are doing to achieve growth in a dormant market
New strategies needed to achieve high performance When paradigms change, accepted benchmarks go out of the window. The personal lines insurance industry in North America is experiencing change on this scale, with entirely new business models being employed to meet consumers’ evolving needs and preferences. While some established firms are having their market share plundered by innovative newcomers, others are transforming their products and their operating models to remain relevant. The most successful of these are dismissing the conventional wisdom that modest growth is acceptable. The question is: what new distribution strategies should personal insurers adopt to achieve high performance? More specifically: what is the role of multi-channel distribution? 1
2
The UK insurance market has transformed.
What does this mean for the US?
The general insurance market in the In the light of this swing to the online the UK, and British insurers which have
UK – and in particular the personal lines channel, it is not surprising that tried to export their direct model to the
motor insurance market – has experienced the leading UK direct carriers have US have to date enjoyed little success.
profound change in the past 10 years. The experienced strong growth. The Admiral
growth in personal use of the Internet Group, launched in 1993, has increased Few dispute that the US market is
for research and purchasing, together its revenue consistently at well over changing. Customers’ preferences
with the advent of comparison websites 10 percent a year while maintaining a and behavior have shifted, and new
and direct online insurers, has resulted combined ratio which, most years, has technologies are creating new ways
in more than 50 percent1 of private auto been comfortably under 90 percent. for them to research, buy and manage
insurance sales being claimed by these With its six brands – one of which their insurance. In such a fluid market,
innovative newcomers. Online sales of is the popular price comparison site how should insurers respond?
household insurance were measured at Confused.com – it commands 11
10 percent in 2009, with the Association percent of the British auto market. To gain a better understanding of this
of British Insurers stating that this altered environment Accenture carried
figure could double by 2011. In its 2012 The question which confronts US out a survey of 4,000 personal lines P&C
“Key Facts” report2 it noted that 31 insurers is how relevant all of this is customers in the US. This not only allowed
percent of all P&C insurance was sold for them. As in the UK, US consumers us to measure consumers’ attitudes and
direct (on the Internet or by telephone) have become much more reliant on the intentions regarding the purchase of
compared to 40 percent by brokers Internet to search for information and insurance, but also to get a glimpse of
and 8 percent by exclusive agents. recommendations about insurance. Geico, where the market is headed. The findings
Progressive and USAA have enjoyed robust have confirmed our belief that meaningful
growth (Figure 1) and gained market share growth is eminently attainable – but the
at the expense of those carriers which choice of distribution strategy is critical.
depend heavily on the agency channel.
Yet comparison websites have not had
anything like the impact they have in
3
Figure 1: Geico, Progressive and USAA have significantly outperformed the
P&C industry as a whole.
35%
30%
NPW YoY Growth
25%
20%
15%
10%
5%
0%
-5%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
115%
110%
Combined Ratio
105%
100%
95%
90%
85%
80%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Industry Geico Progressive USAA Group
Source: Accenture Research analysis based on AM Best data, 2012
4
Accenture research confirms customer
preferences are changing
Accenture’s US P&C Insurance Consumer becomes increasingly important. Despite results. This helped to identify segments
Survey leaves no doubt that the online the abundance of free information and which display similar behavior and
channel plays an important part in most recommendations in our Google-driven preferences, and which could therefore
customers’ interactions with their insurer. world, well over one in three customers be a starting point for developing and
However, it would be wrong to conclude are willing to pay for advice about the delivering differentiated insurance value
that the Internet’s gain has been agents’ insurance that is best for them (Figure 4) propositions and treatments. Many
loss. Rather than simply switching from – and more than half are prepared to pay carriers have realized, from their own
one channel to the other, consumers are at least 10 percent more. The younger the experience, that crude segmentation
becoming more diversified – they prefer customer, the greater the perceived value based on demographics generally fails to
to use different channels for different of good, personalized advice (Figure 5). deliver the results they are hoping for.
stages of the buying cycle. So as Figure 2 Consumers are more complex than that,
shows, websites are the preferred source Much has been written about young and a more nuanced approach is needed.
of information for those looking to buy consumers who are entering the market,
insurance, but when it comes to requesting and how their familiarity with the Our analysis confirms that there are
a quote and purchasing a policy, agents Internet, social media and mobile devices no blockbuster variables, like age or
are the most popular channel. is changing insurance distribution. Internet affinity, that split the market
The fact is that age is not a decisive cleanly. It is possible, though, to define a
Much of the success of the aggregator and consistent predictor of channel number of basic segments which can be
channel in the UK can be attributed to the preferences. The four columns in Figure 6 targeted effectively with differentiated
dominance of price within consumers’ set demonstrate this and serve as a reminder marketing, sales and service strategies.
of selection criteria. While respondents in that there are many demographic, Figure 7 contains one version of such a
Accenture’s US survey also rated price as psychographic, lifestyle and other factors set of high-level segments, while Figure
the most important factor, it is certainly which can account for differences in how 8 illustrates how the different criteria
not the only one (Figure 3). customers would like to be treated. which consumers use to select insurance
products and providers vary in importance
In light of the growing reliance on the A key part of Accenture’s research was from segment to segment.
online sales channel, the question of advice an in-depth conjoint analysis of the
Figure 2: Insurance customers’ channel preferences vary according to
their requirements.
Q: Where would you go to Q: Who do you trust most to Q: Who would you approach Q: How would you prefer to
get information about provide advice about the best to get auto/home insurance set up your policy and proceed
products & prices? Insurance policy for you? quotes that address your with the payment?
specific needs?
Insurers’ Independent 66% Exclusive In person with
websites 39% 33% 72% agent agent 66% local agent 27% 44% 71%
25%
In person
Friends & My friends & 61% Independent with exclusive
family 36% 25% 61% family agent 65% 29% 35% 64%
24% agent
Online In person with
Exclusive Exclusive 58%
agent 33% 23% 56% agent insurer 58% independent 31% 32% 63%
23% website agent
Google or
other search Consumer 49%
34% 21% 55% associations 16%
Aggregator 46% Online 23% 35% 58%
engines
30% Insurer’s
Aggregator 35% 19% 54% Aggregator call center 27%
7%
Insurers’
call centers 32% 21% 53% % selected within top three
Independent
agent 32% 17% 49%
Moderate preference Strong preference
5
Figure 3: Price is important to insurance customers, but it is not the
only factor.
Q: What are the most important factors you would consider when selecting an auto / home insurance
product or provider?
Quality: nature & level Speed to set up Point of contact to
of service provided a policy set up a policy
8% 8% 9% 13% 24% 38%
Variety: type of Advice
policies offered available
Price
Figure 4: Customers are willing to pay more for relevant, customized advice. Accenture’s US P&C
Insurance Consumer Survey
Q: Would you be willing to pay to get personalized advice or
leaves no doubt that the
assistance when purchasing auto/home insurance? If so, how much?
online channel plays an
20% more 9% important part in most
customers’ interactions with
I am willing to
pay more
38% 15% more 18% their insurer. However, it
AVERAGE: 9.6% would be wrong to conclude
that the Internet’s gain has
10% more 29% been agents’ loss.
I am not willing
62%
to pay more
5% more 44%
Sample base: Sample base:
All respondents Respondents who indicated they
would be willing to pay more
6
Figure 5: Young consumers recognize the need for, and the value of, Our analysis confirms that
personalized advice.
there are no blockbuster
Q: Would you be willing to pay more to get personalized advice or variables, like age or Internet
assistance when purchasing auto/home products or services? affinity, that split the market
cleanly. It is possible, though,
16% to define a number of basic
27%
I am willing segments which can be
to pay more 49%
68%
targeted effectively with
differentiated marketing,
sales and service strategies.
84%
73%
51%
I am not
willing to 32%
pay more
18-24 25-44 45-64 65-74
Figure 6: While age does affect customers’ channel preferences, it does not
do so in a consistent way.
Q: By which channel would you prefer your quote to be sent to you?
29%
Website 37% 41%
53%
Over the 17% 32%
phone
32%
21%
In person 32%
39%
18% 26%
Mobile app 10%
4% 5% 3% 1%
Video
18-24 25-44 45-64 65-74
7Figure 7: A conjoint analysis of the findings of Accenture’s US P&C Insurance Consumer Survey
helped define five customer segments which would warrant different approaches by insurers.
ONLINE ONLINE AGENTS MULTI-CHANNEL MULTI-CHANNEL
Price Sensitive Online Pragmatic New Traditional Advice Seeker Social
“Getting the best “I value convenience “I prefer personal “Above all, I’m looking Independent
price is most and efficiency.” relationships.” for the best advice.” “I value diversity
important to me.” and want to be able
to choose between
various options.”
Buyer values Price Speed, point of contact No differentiator Advice, quality Variety: type of coverage
to set up policy offered
Information Insurer websites, web Insurer websites, call Agents Insurer websites Insurer websites, web
search engines centers, aggregators search engines, call
centers, consumer
associations
Quote: from Insurer websites, agents Insurer websites, agents, Agents Agents, insurer websites, Agents, insurer websites
whom? aggregators aggregators
Channel Quote: which Website Website Phone, in person Website Website
Preferences channel?
Advice Agents, consumer Agents, consumer Agents Agents, consumer Agents
associations, aggregators associations associations
Set up policy Online, agents Online, agents Agents Agents, online Agents, online
Ongoing Insurer’s website, online Insurer’s website Mail, online banking, Insurer’s website, online Insurer’s website, online
Payment banking insurer’s website banking banking
Time with 7 years 6.5 years 8 years 7.5 years 7 years
insurer
Loyalty
Plan to look 27% 29% 18% 27% 23%
around
52% women 51% women 57% men 50% men 52% women
Demo- Age: 18-24 12% 15% 17% 14% 14%
graphics 25-54 59% 55% 45% 55% 55%
55+ 29% 30% 38% 31% 31%
Figure 8: The importance of different product selection criteria to customers in the five segments.
25% 25% 30%
45%
61%
19%
20%
37%
8%
22% 9%
Price
26% 10%
15% Point of contact to set up policy
16% 8%
Speed to set up policy
6% 11% 6%
10% 25% Advice available
7%
6% 6% Variety: type of coverage offered
5% 16%
6% 6% 8% 6% Quality: nature & level of service
Price Online New Advice Social
Sensitive Pragmatic Traditional Seeker Independent
8Growth will depend on a focused distribution
strategy and customer-centric engagement
Accenture’s consumer research and our 2006) and Progressive at 7.7 percent Insurers need to decide whether their
review of recent market developments, (2.1 percent since 2006). It is fair to say primary sales channel is the Internet
together with our years of experience that this growth has been profitable – or their network of agents, and should
working with many of the world’s leading the combined ratio for both Geico and surround that channel with the
insurers, has convinced us of two things: Progressive, over the 10-year period, has capabilities required for it to compete
averaged a little over 92 percent, while and win. The online channel is where
1. It is possible for North American that of the personal lines auto industry the strongest growth can be found, and
personal lines carriers to achieve and as a whole has been 99.8 percent.3 High it certainly helps to be positioned in a
sustain meaningful, profitable growth in performance is not an aberration, despite rapidly expanding sector of the market. At
a sluggish market. the prevailing economic conditions, but the same time many customers still prefer
2. In order to do so, they need to focus rather the predictable result of the correct to buy from agents, and for many carriers
on one of two business models – strategy properly executed. with an established agency network this
the integrated agent model or the finding is welcome news.
As for strategy, we have arrived at the
online model – while embracing
conclusion that a channel strategy
new technologies to enhance the
in which a carrier attempts to be all
The online direct model
effectiveness of these models.
things to all people has been, and will Internet sales of auto insurance have
The first point can be illustrated continue to be, unsuccessful. A diversified increased steadily over the past few
empirically (Figure 1). While the personal strategy will prevent the insurer from years. They not only outstrip agent sales
lines auto insurance industry in the US concentrating on its strengths, and it but appear to be unaffected by the
grew at a compound annual rate of offers few if any opportunities for synergy recession – it would be difficult to tell,
2.4 percent between 2001 and 2011 – the two models require entirely different by looking at Figure 9, that the economy
(and a meager 0.4% since 2006), Geico sets of capabilities and impose different slumped in 2008. Direct insurers have
grew at 9.7 percent (6.9 percent since investment priorities. gained a hefty share of the market and,
Figure 9: Since 2004 the number of US auto insurance online quotes has
more than doubled, and online sales have more than quadrupled.
Annual quotes submitted online (millions)
+21% +5%
+15% -1% -3%
+15%
+30% 38.8 37.7 39.6
32.4 32.1
28.1
24.4
18.7
2004 2005 2006 2007 2008 2009 2010 2011
Annual auto insurance policies purchased online (millions)
+3% +6%
+22%
+8%
+37% 2.9 3.1
2.8
+58%
2.1 2.3
+35% 1.6
1.0
0.7
2004 2005 2006 2007 2008 2009 2010 2011
Source: comScore Inc. 2011 Auto Insurance Shopping Report
9as Figure 1 shows, they have done so to up-sell on loss-leading base policies As consumers have become
while keeping their costs low, in spite could lead to the accumulation of bad
of their large investments in brand risk, which may explain why some of the more focused on price
promotion. There’s no disputing that, at more aggressive direct carriers in the as a key buying criterion,
this time, this is a sweet spot for insurers. UK have experienced a slow but steady
deterioration of their combined ratio. some online direct insurers
A large number of consumers, who are have shifted the focus of
comfortable navigating the Web and Achieving profitable growth demands
transacting online, prefer to make what a variety of special capabilities. their promotion from their
they regard as a straightforward auto Pricing sophistication is the first of products to their prices. This
insurance purchase without interacting these – the ability to operate on the
with an agent. Almost three out of right side of a wafer-thin margin while has given rise to the concern
four would look for information on constantly adjusting prices and tracking that, in trading features for
insurers’ websites, and 58 percent say the impact of these adjustments.
they would go online both to request lower prices, customers may
a quote and to set up and pay for their Then comes up-selling and cross-selling. end up buying unsuitable
policy. They can do this whenever is Some carriers do this on their website,
most convenient for them, they can as part of completing the application or inadequate coverage.
easily compare offerings without being process. Others urge the customer Progressive’s “Name Your
pressured to buy, and most importantly: to phone their call center, where
they can often get better prices. commission-driven agents are waiting to Price” feature caters to
convert the opportunity. the price sensitive shopper
It has to be said that direct insurers have
been aided by their more traditional Online carriers that have the highest while providing transparency
competitors, which have mostly failed up-selling and cross-selling rates hone around coverage
to differentiate their offerings and their ability to constantly modify all
the value of their advice – an earlier of the elements which may influence a implications. It allows visitors
Accenture survey4 found that 75 customer to make the call and to buy the to the carrier’s website to
percent of customers believe there upgrades. From market segmentation
is no significant difference between to the design of their website and the request a quote, and then
the products and services offered by scripts which the call center agents use, use a “slider” to move the
insurance companies. With this mindset, each of these hundreds of factors is
it is hardly surprising that auto insurance tweaked and stored in a perpetual self- quoted price up or down.
is largely viewed as a commodity, and educating, self-refining system. It is a Changing the price affects
that price plays such an important role. process that never ends, partly because
customer preferences are forever in flux
the features included in the
Given the downward pressure on and partly because competitor responses policy as well as the size of
premiums, it is essential that carriers that force the carrier to respond in turn.
wish to compete in this model reduce
the deductible, and gives
their cost base. They need a modern To attain this level of agility requires customers a clear view of
platform and efficient processes. They a highly streamlined back office
also need an aggressive digital marketing and automated processes that lend
what they are getting for
strategy that optimizes Internet tools themselves to easy configuration and their premiums.
and channels and generates a favorable mass personalization. Insurers need
ranking when search results are presented advanced data analytics and predictive
to the user. Just as importantly, they modeling capabilities to rapidly make
need to simplify their products and sense of what is happening and to
streamline their sales process. recommend an appropriate response.
They also need an exceptional marketing
Once the basic policy has been sold, team, one with strong analytic and
there is an opportunity for the carrier to digital skills but also one with a high
engage with the customer in an effort tolerance for change and the ability to
to persuade him or her to buy relatively collaborate closely with the IT team.
inexpensive but more lucrative add-on
coverages such as roadside assistance Notwithstanding many customers’
or rental car coverage. Success at this preference for the clinical anonymity
stage of the sales cycle is the difference of the online purchase, Accenture’s
between merely enlarging the customer research shows that expert, personalized
base and growing profitably. An inability advice is highly valued (Figure 4).
Direct online insurers could broaden
10their appeal by using emerging digital still prefer to deal with agents. Sixty- This complexity also makes it more
technologies to provide relevant product six percent named exclusive agents and difficult to compare quotes. Confronted
selection advice on their website, as 65 percent chose independent agents by an array of policy terms and exclusions,
well as seamlessly transitioning to a among their top-three preferred channels and a wider selection of features, many
contact-center agent via video, chat or to get quotes – insurers’ websites came consumers feel imperfectly equipped
phone. By supplementing their website in third at 58 percent. Similarly, local, to make the right decision (Figure 10).
with other integrated communication exclusive and independent agents made In this situation the value of expert
and interaction channels, and building up the top three channels for setting advice and a trusted reputation
advice provision into the system, they up a policy and initiating payment, becomes obvious to the customer.
could not only add impetus to their with an average score of 66 percent,
up-selling effort. These enhancements followed by online with 58 percent. While young first-time insurance buyers
would also enrich the customer recognize the value of the tailored advice
experience, differentiating the carrier It is also important that the inroads that agents offer, many do not want to
and giving even the most cost-conscious achieved by direct insurers are mostly interact with them the way their parents
customers a reason to become loyal. in personal lines auto. Although do. They are more likely to embark on a
our survey respondents showed no multi-channel journey that spans Google
significant differences between their search and social media to perform
The integrated agent model channel preferences for auto and research, the carrier’s website to create
Accenture’s research shows that although household insurance, purchasing a an initial quote, chat with an agent to
there is a strong trend toward direct home policy online is generally more seek clarity on coverage options, and then
online sales, the majority of consumers complex than buying an auto policy. “click to call” to seek final advice from
the agent before making the purchase.
Figure 10: Buying insurance policies online may be impeded by the difficulty
many customers have in understanding the product details.
Q: How comfortable are you in reading & analyzing insurance quotes/
policies before selecting the best policy for your needs?
Very
33%
comfortable
Somewhat
59%
comfortable
Not comfortable
8%
at all
Auto/Home
Insurance
11The company’s website and digital messages that are relevant and other new digital media to reach and
marketing campaigns that drive compelling to each individual customer. engage with customers wherever and
traffic are an important first step. however the customers prefer.
The site needs to make a strong case Carriers also need to segment their
for the value of an agent’s advice and agent base so that website visitors can To achieve this integrated cross-channel
the importance of a holistic view of be connected with agents who are most vision, insurers need to develop a strategy
the consumer’s insurance needs. likely to make the sale, establish an and roadmap to dismantle the internal
enduring relationship and grow their share barriers that constrain agents, call centers,
More effective use of customer and of the customer’s wallet. These agents the Internet, mobile, social media and
prospect data – both internally and must be supported with a comprehensive other channels from working together and
externally sourced – will also be key. range of marketing, prospecting, selling meeting customers wherever they shop
The data should be centrally located and office management tools. Mobile for insurance. For most, this will entail
in a modern customer relationship and collaboration technologies will a change of operating models, from one
management (CRM) or agency enable them to provide more responsive supporting multiple independent channels
management system, making it service, and draw on the necessary to one which enables a seamless dialogue
available throughout the organization experts whenever they can help advance which has the customer at the center.
and across channels. Uses of this data or close the sale. Agents should also Achieving this alignment typically entails
should include sophisticated customer be trained to become expert at using difficult changes to organization design,
segmentation and the development websites, blogs, social networks, governance, performance management,
of data-driven insights that facilitate testimonials, mobile devices and any incentives, behaviors, and culture.
12Strong growth is possible, but not for all Market data collected over the past 10 years shows that the 10 largest US personal lines insurers (by gross written premiums) grew at a compound average rate of 2.1 percent between 2001 and 2011, and at 1.8 percent between 2008 and 2011. It is our conviction that, with a clear focus and decisive measures to enhance and support the chosen sales channel, high growth rates are attainable. Carriers that fail to concentrate their efforts and resources on a primary sales channel will have limited growth opportunities. 13
Authors About the series About Accenture Research
Erik J. Sandquist, Insurance Distribution The Digital Insurer is an Accenture series Accenture Research is Accenture’s
and Marketing Business Service Lead, that provides insights on how insurers can global organization devoted to Economic
North America, Accenture. achieve high performance in the digital and Strategic Studies. The staff
age. Digital is not simply a new distribution consists of 150 experts in economics,
Gordon D. McFarland, Insurance channel—it offers an entirely new way of sociology and survey research from
Distribution and Product Development doing business. Insurers are learning how Accenture’s principal offices in North
Offering Lead, Accenture. to provide easier access to more relevant America, Europe and Asia/Pacific.
products and services at a lower cost, and
this series presents pragmatic discussions
Endnotes on analytics, back-office digitization, About Accenture
1. The Association of British Insurers: UK marketing, mobility, social media and more. Accenture is a global management
Insurance Key Facts, September 2011 consulting, technology services and
(quoting the Datamonitor report: UK Related resources outsourcing company, with approximately
Personal Insurance Distribution 2011) You can find the full collection of related 259,000 people serving clients in
2. The Association of British Insurers: UK resources at accenture.com/digitalinsurer, more than 120 countries. Combining
Insurance Key Facts, September 2012 including the following items: unparalleled experience, comprehensive
capabilities across all industries and
3. A.M. Best’s Global Insurance Database Analytics business functions, and extensive research
4. Accenture Consumer-Driven Innovation • Reaping the benefits of analytics: Six on the world’s most successful companies,
Insurance Survey (2011) ways to make your business intelligence Accenture collaborates with clients to
smarter (2012) help them become high-performance
businesses and governments. The company
• Analytic insurer (video, 2012) generated net revenues of US$27.9 billion
Back-office digitization for the fiscal year ended Aug. 31, 2012. Its
home page is www.accenture.com.
• New era in insurance: Cloud computing
changes the game (2012)
• New technology and efficient pricing:
Is telematics the next insurance
revolution? (video, 2012)
Digital insurance
• The digital insurer: Change now to get
ahead (P&C and life insurance) (2012)
• Accenture technology vision: What it
means for insurance (2012)
Digital marketing
• Customer experience platform: A
foundation for growth for insurers
(2012)
• Empowering agents to employ digital as
a competitive weapon (2012)
Mobility
• New age of mobility (2012)
• Selling more with mobile solutions:
Building the right strategy, innovation
agenda and sales representative
experience (2012)
Social media
• Insurers and social media: Vast
potential, significant challenges (2012)
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