How To Make Money From Insurance

Transcription

1 AN EPOQ WHITE PAPER Building Consumer Trust and Lifetime Value for Profitable Growth in the Life Insurance Sector

2 Increased competition, challenging market conditions, for life insurers to gain market share. How the competition? How can they be perceived to be adding value to their customers? This paper identifies the issues surrounding a competitive market place, but also introduces new ways for deeper engagement with your customers.

3 Introduction Background Today s highly competitive marketplace is dominated by the challenges of technological upheaval and fast-changing customer expectations. It s a scenario that requires every business to be alert to the needs of its customers and agile enough to respond to the opportunities these present. Quite simply, their future prosperity depends upon it. Nowhere is this more true than in the insurance industry, where ongoing new business from traditional products has slowed down under the impact of changing consumer attitudes and growing internet competition. The Great Recession and a growing Insurance industry forecasts do not make encouraging reading, with life insurers set to endure a shrinking share of the consumer wallet and low profitability.. The industry s difficulties are perhaps best summarized by a 2011 LIMRA survey which found that only 59% of U.S adults own either individual 2 and/or group life insurance. A separate LIMRA study found that the majority of Gen X and Y consumers believe they need more life insurance but less than 3 20 percent say they are very likely to buy it. pushed insurance down the household agenda. provides fresh opportunities for growth. The challenge for insurance providers is how best to manage this volatile operational environment and turn it to its advantage. As the 2014 Ernst and Young Global Consumer Insurance survey has noted by delivering services beyond policies...insurers can expand their fundamental value proposition and transform consumer 1 perceptions about the industry. In this white paper, we look at the market forces affecting insurance providers and how they can satisfy demand and build ongoing productive relationships by adding value to their customer offer with a range of legal services. Four in ten U.S adults do not have life insurance cover LIMRA, Person-Level Trends in U.S. Life Insurance Ownership, March There are many reasons for this stagnation, but the principal ones concern: a changing market environment; increasing customer disengagement; perceived product complexity.

4 The market environment The percentage of households without life insurance increased significantly from 2004 to 2010 with 4 ownership of individual policies hitting a 50 year low. Half of the US population is underinsured and 70% of households would have immediate trouble meeting 5 living expenses if the primary breadwinner died. While insurers are making efforts to reach out to underinsured consumers and win their trust, the complex nature of life insurance makes these initiatives difficult. Many consumers are confused by the product and there is a tendency to prioritize other day to day expenses. Many consumers are demanding a simpler offering which is easy to grasp and can be compared with products from other providers. This reflects their experience in other industries which are more consumer orientated and which prioritize the user experience; both in terms of convenience and ease of understanding. Life insurance has declined in the last decade despite the large numbers of consumers which say they value such protection. In part, this is because the industry has failed to reach out to and educate consumers, as well as keep up with changes in consumer buying habits. According to PricewaterhouseCoopers (PwC), 61 percent of consumers between the ages of 18 and 54 find buying life insurance online attractive and the Internet now plays a role in eight out of ten life 6 7 insurance purchases. These trends are likely to continue. Younger generations are more self-service orientated and more inclined to use the online channel for financial services. Among those aged % say they 8 prefer to buy direct. Such findings suggest that the battle for new customers is being won by those with a better understanding of the way in which online availability is influencing our buying decisions. Rather than resorting to increasingly irrelevant product copying, tinkering or rates cutting, online providers are customers greater choice, accessibility and easier interaction. 61% 80% 31% you can t simply wait... to create new openings as more proactive competitors are going to get in ahead of you. You have to be nurturing the new markets, designing the smart new products and forging the partnerships needed to capitalize on these opportunities now. PwC: Life insurance 2020: Competing for a future

5 Customer disengagement Complexity of product Death and dying have always been uncomfortable topics for discussion and have been easier to avoid, thanks to the fallout from the Great Recession. But even before the economic downturn life cover was an undersold product both in the number of policies bought and the amount of cover provided. The scale of the problem is such that Swiss Re has calculated the US life insurance protection gap to be 9 20 trillion. The amount of underinsurance is greatest among those likely to need life insurance the most: single parents, couples with children, and those aged 35 and under. Life insurance protection gap $20 trillion With literally hundreds of insurance products for potential customers to consider, life insurers are failing to meet the value for money and clarity criteria customers are looking for. Demands on our individual time have never been greater, so it s incumbent on any provider to make sure their product propositions are clear and easily understood. Yet research suggests that consumers too complicated and unnecessarily 12 confusing. Customers remain disengaged. There is often little or no relationship between insurers and their policyholders and insurance is seen as a purely transactional business, rather than something that adds value to customers lives. Despite this, the recent Global Customer Insurance Survey from Ernst and Young found that consumers are demanding more frequent, meaningful and personalized engagement with their insurer. This suggests that stronger two way relationships with customers will engender future success if the 10 industry can respond. The bottom line is that customers have no faith in the industry. Poor customer communication from a collective failure to promote the importance of protection products to not engaging in ways that customers value is compounding this situation further. So much so, in fact, that customer distrust of the insurance industry is widespread, with dissatisfaction levels significantly worse than those of 11 banking or supermarkets. By acting to help consumers more actively mitigate risk (rather than just insure risk), insurers may be able to shift consumer perceptions of value and trust. EY Global Consumer Insurance Survey 2014

6 Remedies So what should the life insurance industry be doing to address these issues? Three key actions are called for: Deliver lifestyle Foster greater customer solutions to customers engagement online Streamline the product Developing these strategies for success will create a blueprint for capturing market share and increasing customer value. Communicate online from the newer market entrants, then it must intently focus on customers and personalizing the service, to about lifestyle protection and not just life insurance. Linking lifestyle protection and legal protection There is an obvious synergy between lifestyle protection and legal protection. Life providers already have conversations with customers about planning for the future and protecting their families, so adding relevant legal services to that dialogue stands to improve the customer experience. Services could include providing customers with estate planning services such as a Will or a Living Trust which are needed to decide what happens to their property after they die. Services could also include a Power of Attorney to deal with incapacity, or a Living Will to specify what actions should be taken in an end-of-life situation. We live in the always on era of mobile communications, via devices such as tablets and smartphones, making it incumbent on providers to The power of digital communications needs to be harnessed and utilized imaginatively to make insurance propositions more relevant and attractive. This applies especially to those aged 35 or under a core group of potential life customers who are currently underserved and expect to interact digitally. The online opportunity is to engage and interact with customers when and how they want, rather than just reduce transaction volumes and costs. Giving online access to tools that help customers manage everyday legal needs, for example, can help start an ongoing conversation and build a stronger, more long-term relationship between customer and provider. Of course, becoming a lifestyle partner in this way will require a partnership or collaboration with an ancillary provider. It will also need the industry to step up its online capabilities to capture the right data with which to identify new sales opportunities, as well as providing customers with online servicing capabilities to review and update their wills or insurance cover.

7 Create a streamlined and integrated customer experience Consumers are on a quest for value for money in all their transactions, especially when constrained by economic circumstances. The insurance industry has to respond accordingly by developing recognizably simple and flexible products that deliver the outcomes customers are looking for. Adding relevant additional services to a life policy can give greater value to the customer, but only if they are delivered in a seamless and integrated way. Including relevant legal services will transform the insurance proposition into one of overall lifestyle protection, and, if delivered online, will answer the needs of time-poor customers. Furthermore, their delivery through a variety of relevant and responsive channels both human and digital will create an integrated experience that is attractive to both prospects and customers alike. In a pricedriven market, it is very the touch points which are important to customers in order to move away from bargain basement prices being the sole driver for customer decisions. Graham Handy, Global Customer Insurance Leader at EY, 12 November 2014 Conclusion This is a time of change for the insurance industry, but fresh opportunities for growth and development are still very much present. To take advantage, insurers need to reinvent themselves as lifestyle partners, rather than remain passive providers of products whose relevance and desirability have become obscured by the dark clouds of recession and the industry s historic lack of customer responsiveness. partners to add complementary services, radically overhauled so that it profitably meets the demands and expectations of the online age.

8 About Epoq Epoq works with Life Insurers and financial institutions to help them innovate, differentiate and give greater value to their customers. We achieve this by offering our pioneering legal document services, such as Wills and Powers of Attorney, as an enhancement to our client s products. Our mission is to make the law easy, accessible and affordable. Yearly, more than 500,000 fully personalized legal documents are created by consumers on our platform. With offices in Michigan and in London England, Epoq is respected globally as a thought leader in legal technology and we provide our unique services to over 56 major brands worldwide. References 1 Reimagining customer relationships Key findings from the EY Global Consumer Insurance Survey 2014 p12 2 LIMRA, Person-Level Trends in U.S. Life Insurance Ownership, March LIMRA, Majority of Gen X and Y Consumers Believe They Need More Life Insurance, But Few Will Buy, March LIMRA, Household Trends in Life Insurance Ownership 2010, 5 LIMRA, Facts About Life, September 2010, p. 1, 6 PwC analysis - FS Viewpoint, February LIFE Foundation and LIMRA, The 2011 Insurance Barometer Study 8 LIFE Foundation and LIMRA, The 2011 Insurance Barometer Study 9 Swiss RE The mortality protection gap in the US Reimagining customer relationships Key findings from the EY Global Consumer Insurance Survey 2014 p3 11 Reimagining customer relationships Key findings from the EY Global Consumer Insurance Survey 2014 p9 13 PwC analysis - FS Viewpoint, February 2013 p11 Contact us Epoq Legal Inc 2301 Platt Road Ann Arbor MI Tel: info@epoqlegal.com Web: