Traditional insurance carriers, beset by slow growth and high churn, are seeking new ways to attract and retain customers.
While customers still trust their primary insurers the most when it comes to providing the next insurance product, they are still switching carriers more often and are increasingly open to new entrants, including insurtechs, big tech and other nontraditional players.
Smart insurers are taking a cue from their own customers, many of whom already use connected devices to monitor their cars, their homes and their health.
Working with Dynata, an online global market research company, Bain & Company surveyed nearly170,000 insurance customers in 16 countries and found that worldwide, 39 percent of insurance customers currently use at least one connected device, and about 72 percent expect to use one in the future. Insurers can use the data collected by these devices to develop products and services that are geared to their customers' individual needs.
These are among the findings of Bain's fifth global survey of retail insurance customers, Insurers: How to Lead in the New Era of Connectivity.
"Connectivity is the future of the insurance industry. Customers have spoken and they expect a truly integrated, seamless and digital experience across all aspects of their life," said Henrik Naujoks who leads Bain & Company's global insurance practice, based in Hong Kong. "Insurers must acknowledge that this same connectivity is essential for their survival, success and the future of the industry, so it's a phenomenal opportunity in terms of offering customers what they both want and need."
Insurance has long been a low-touch industry. About one-third of customers say they go an entire year without interacting with their provider even once. However, Bain found that consumers who own at least one connected device interact with their carriers an average of 19 times a year, more than four times the frequency for customers who do not own any connected devices. Customers with connected devices tend to remain longer as customers, buy multiple products and recommend their carrier to a friend or colleague.
The results show that customer expectations are changing and consumers increasingly want their carriers to be part of an ecosystem of providers—made up of both insurers and non-insurers; that help them lead safe and healthy lives. They see connected devices and services playing an important role in these ecosystems. At the same time, customers in many markets are also increasingly open to buying insurance from nontraditional sources, especially big tech companies.
The way forward for incumbent insurers in a connected world is to offer an ecosystem of services powered by connected devices; make distribution simple and digital and develop offerings for tech savvy and value-driven millennials.
Key Report Findings:
- About 39 percent of surveyed insurance customers worldwide currently use at least one device connected to their smartphone or tablet via the Internet, and about 72 percent plan to use such a device in the near future
- Among customers who use digital channels, mobile is rising in importance, underlying the need for experiences that are simple as well as digital. In China, more than 80 percent of digital customers prefer mobile channels to research insurance and/or interact with a provider
- Many customers trust at least one tech company more than they do their primary insurer, or insurers in general, particularly in emerging markets. These customers would be more likely to purchase insurance from Amazon if it offered such products. 84 percent of customers in Indonesia, or 66 percent in Brazil rank big tech companies higher than insurers, compared to about 39 percent in the US.
- Millennials are more likely to use connected devices and digital channels compared with other age groups and they are also more likely to switch carriers, particularly among the younger cohort of millennials (ages 18 to 24). Younger millennials are also the most open to trying new entrants, including those from outside the industry. For example, in India, 93 percent of millennials are open to sharing their personal data with insurers, or 83 percent in the US.
"The battle of ecosystems will be the next frontier for the insurance industry. Those who can truly harness the power of connectivity will be the ultimate winners," said Harshveer Singh, a partner in Bain's Financial Services practice in Asia-Pacific and a co-author of the report. "The next five years will be fascinating, especially as we see the new digital tools and innovations that gain importance, especially in emerging markets such as Asia."
The use of connected devices has reached a tipping point, especially among younger and more affluent customers. Among the various types of connected devices, those that monitor health have the highest penetration across most markets, followed by devices connected to cars and homes. The challenge—and the opportunity—for insurers is to figure out how to use this connectivity to serve their customers better. Insurers that successfully target millennials can refresh their customer bases and help fuel organic growth. But doing so requires innovative approaches based on digitalization and connectivity.
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