Restoring value to General Insurance

To understand more about consumer attitudes to buying General Insurance and why it has become a low-involvement, low-value category, TNS conducted a quantitative study among 2000 consumers buying a range of both mandatory and discretionary General Insurance products. The study was based on proprietary NeedScope methodology to identify different types of consumer value and how different types of insurer can respond to create mutual value. Fieldwork was conducted in October 2013 with small scale qualitative work in support. 2

A devalued friend in need Insurance offers both emotional and practical support. It s comforting to know that a bump to the car, a tree falling on the house or an illness picked up on a foreign holiday won t result in financial ruin. You are covered, you can relax: your insurer is looking after you and your loved ones, and it will stand behind you if you meet serious trouble. It should be a relationship of real value to both parties. But 30 years of a race to the bottom on price has drained that value out of the market. Insurance is a product that consumers should feel good about. But increasingly they don t, and the whole marketplace has become a low-involvement category, a phenomenon exacerbated by the growth of price comparison websites. The relationship between the customer and the insurer, the company that is protecting their interests, is cool or even hostile. But that can be changed. A better understanding of individual customers, identifying their different preferences and needs, can bring back a sense of value to the insurance policy. And companies that find that understanding stand to make real progress in the marketplace. Restoring value to General Insurance 3

The dominance of price The road to the decline of value in insurance was paved with good intentions. Under fire for complicated policies packed with small print, insurers decided to make things simpler for their customers. In the search for simplicity, the emphasis shifted to price. Technology added to the price impetus, with the internet making it so much easier for people to buy insurance. Today, millions buy through price comparison websites, and 65% of those buying a motor policy consult such a site in the course of their purchase journey. That emphasis on price is now so overwhelming that many perhaps most customers hardly give a thought to the company and what it is offering them. They expend time and effort on searching for the best price, but often make little effort to understand what exactly they are buying. They buy a policy and assume that they are covered: they don t think carefully enough about the terms and exclusions until they have to make a claim. 1 2 3 4 5 4

Motor and home insurance purchases are especially prone to be driven by price. Taking a closer look at motor policy renewals suggests that the 36% who say they renew wholly on price does not give a full picture of just how price-driven the renewal process is. In fact, it seems that price plays a part in more than half of all renewals. % renewing their policy % renewing solely on price 16 48 36 67 28 73 21 75 10 90 Restoring value to General Insurance 5

A fraught relationship The process of renewing an insurance policy, or switching providers, often resembles a haggling session in the bazaar rather than an important financial transaction 15% of motor insurance customers got quotes from other insurers to beat down the initial quote from their existing provider. Another 21% do some research, while 6% get another quote but stick with the insurer anyway so three quarters of those who get an alternative quote on renewal are using it for a negotiation. If the customer stays, that is at first sight a benefit to the insurer, even if it represents a drop in revenue. But that customer is often not very happy with the company more than half (53%) are disappointed when their provider does not offer the lower price straight away. Although 37% said that they enjoyed the bargaining. This process communicates very poor messages about the value of the insurance itself, and about the low value that the company puts on its customers. It creates a conflict with them, setting up another argument for the following year rather than developing a healthy and enduring business relationship. It s no surprise that the use of comparison websites is widespread. But the relationship with these intermediaries can also raise doubts and fears among consumers. Are they really getting the best deal, does the site favour one company over another, do all the policies sold through the site come from reputable companies? Only a quarter know that many of the comparison websites are owned by the insurers: and 50% would trust them less if they were aware of this.* For reassurance, most people want to talk to a human being and only 12% actually purchase from the comparison sites. Motor policy renewals 67% renewed with the same insurer, but got another quote to negotiate their 15% insurer down only stayed because they believed they had been 21% given the cheapest quote found a cheaper quote but decided to stick with 6% the company anyway were happy with the quote and didn t look 17% elsewhere * Source: TNS Online omnibus survey, nationally representative sample of 1000 consumers conducted between 3-5th December 2013 6

Why can t they just offer you their best deal? It s horse-trading but it s got to be done Makes you lose faith in the company Can insurance companies pay for more prominent positions? I never press the button before speaking to a human being Consumers on insurance companies Consumers on price comparison sites Restoring value to General Insurance 7

A question of confidence On the surface high levels of confidence Our research found that most customers claim to be confident in their eventual choice of policy, and say that they understand what they are buying. 10 9 Confidence 8 Comprehension of policy Under the surface a different picture 7 But qualitative research revealed underlying doubts when people talked in more detail about their purchase decision. Neither confidence nor comprehension are as high as at first appears. 6 out of 10 not that experienced. Think that I have got the best deal but don t know until you claim Customers should always review carefully but I don t and I am sure that I am not alone 6 5 4 3 2 I guess my level of understanding is about 4 or 5 out of 10 Policies are invented not to be read they don t want you to read it; the language is designed to confuse as it saves them money 1 8

People talked about making a choice of products that they do not really understand, because they assume they do not really have to. The language is too complex to be well understood, and they will only really know if they have chosen well or badly if they have to make a claim. The customer journey is characterised as an emotional rollercoaster of anxiety, irritation, frustration, despair and at the positive end relief. They admit that they do not really review their policies properly, and believe that their lack of care was fairly typical customer behaviour. It is almost as if the time people used to take to scrutinise their policies has been replaced by taking time to search websites and haggle over price. The relationship between insurer and insured appears to be dogged by doubt and mistrust. But unlike the banking sector, where customers put all the blame for poor relationships squarely on the providers, they are more even-handed in blaming themselves as well as the insurance companies. False and exaggerated claims from consumers have helped to generate distrust, they say, although the companies are criticised for a short-term outlook and trying to pay out as little as possible. The result is that, instead of feeling reassured and confident on buying a policy, customers feel frustrated and helpless, faced with powerful companies and products they don t understand. In the research, they described a customer journey that starts with a drive to shop around and ends with the purchase of a vital product that they do not really understand, partly through their own lack of attention. Customers are behaving the way the industry has encouraged them to... You must constantly think about switching you d be stupid not to, only aged innocents like my parents just renew Price is the main driver might consider a 5 10% premium And many consumers don t really understand what they are buying and admit that they do not give it the thought that it deserves Restoring value to General Insurance 9

Back to basics 10

Restoring value to General Insurance 11

Rebuilding relationships To bring value back into the marketplace, insurers must develop relationships with customers across all touchpoints. Customers need to feel that they are being treated fairly and kept informed from the initial quote to the handling of any claim, all the way through to the renewal. Renewal Process Marketing Communications Price / Quote Claims Process Product / Policy Documentation Customer Service 12

From our research, it is clear that customers all want the same three basic things: The emotional drivers 1 A relationship of trust on both sides 2 Clarity about premiums and cover 3 A fair price and quick resolution of claims But the degree to which people want each of those things and how they want them delivered is very different. Understanding how these needs differ will lead to an understanding of how they can be best met. To start out on this journey, it will be essential to repair the currently dysfunctional relationship between insurer and insured. So it is worth going back to basics to understand the emotional drivers for an insurance purchase decision. Strong brands develop strong emotional ties to their customers, so understanding consumer needs is essential to begin to rebuild relationships in this category. Our research identified two emotional drivers in this area, which relate to two fundamental emotional states: levels of anxiety and levels of control. I want to delegate to others Lower anxiety Higher anxiety I want to lead the process Restoring value to General Insurance 13

Mapping customers needs The TNS NeedScope analysis tool maps customer needs using the same axes as the diagram on page 13. The six segments on the NeedScope oval are the primary needstates that drive consumers. Each segment represents a need territory that brands could choose to target, and the percentages show the proportions that those groups represent within the overall population of those buying General Insurance. Using the NeedScope tool, we can view the groups in pairs: Freedom and Challenge, the two lower-anxiety and higher-energy needs which together account for just under a quarter of insurance buyers. Reassurance and Control, the higheranxiety needs which together account for 40% of buyers. Simplicity and Distinction, which are polar opposites and which together account for 38% of buyers. 14

Free me from the hassle and complexity of insurance and fit in with my life Speed and flexibility is everything use innovative channels to communicate with me A framework of customer needs Page 14/15 Freedom 14% Challenge 8% 1 2 3 Simplicity 22% Distinction 16% Make the process as easy as possible and do it with a human face Reassurance 20% Control 20% Make me feel like I m getting special treatment; tailor, personalise and treat me with respect TNS 1 Look after me. It s important to me that you are honest and transparent and show that you care Efficiency is everything, be professional, show your expertise and deliver Restoring value to General Insurance 15

Meet the customer groups The Freedom group are carefree and upbeat, they want an insurance policy without a lot of hassle: they certainly don t want a lot of complexity. A one-stop app is appealing to this group, as it just makes things easier. The more assertive Challenge group want innovation, flexibility and speed. They want to challenge what they see as the norms of the insurance business. Their desire to be ahead of the game makes them especially interested in communication via social media. Distinction wants special treatment, to endorse their individuality. They want the same level of professionalism as Control, but are more conscious of their own status. Freedom 14% Challenge 8% Distinction 16% ATTITUDE Live in their phones Live life in the fast lane Successful and respected PRACTICAL NEED Human being in support Give me the information but be quick and direct Expert appreciation of my needs EMOTIONAL NEED Be there for me in my world Don t hold me back, give me what I need Never forget that I am a valuable customer CUSTOMER SERVICE NEED Great interactive and flexible online service Innovative, high speed service with easy access to details Knowledgeable staff delivering a professional and respectful service 16

Due to high levels of anxiety the Control group seek to understand the detail, so they can feel in control. When buying insurance, they look for an efficient, expert provider who tailors policies, guarantees premiums and takes time over the details. The Reassurance group deals with their anxiety by seeking out a provider that will look after me make me feel safe. In customer service, talking to the same person throughout the transaction is particularly important, to provide reassurance. Simplicity wants an easy process, with a human face. They must be supported by clarity and flexibility. They want someone they can relate to, but are happy to be guided. 1 2 3 Control 20% Reassurance 20% Simplicity 22% Thoroughly prepared Live their whole life carefully On my level Full and precise information and knowledgeable staff A single person to look after me and my claim A simple and human process Just get it right for me Care about me and my precious things Don t make it a big deal, just make it clear and simple for me Highly professional approach giving me the precise detail at my fingertips Attentive staff who demonstrate that they care about me and my claim Friendly staff I can relate to and who are easy to understand Restoring value to General Insurance 17

Opportunities abound 18

Brands need to be single-minded To help understand which segments brands currently address, TNS used its proprietary NeedScope tool. This analysis shows that most of the brands are concentrated in just three segments Freedom, Simplicity and Control. By contrast, the Challenge space is relatively open, and only one brand can be found in the key Reassurance space, which accounts for 20% of the market. Clearly, the white space in Reassurance and the relatively open spaces in Challenge and Distinction represent opportunities for insurance brands to address needstates that are hardly being served at all. But there are also opportunities in the spaces that are currently crowded by addressing these needs in a clear, single-minded way. The brands that are closest to the rim of the oval are targeting that need more successfully, while those nearer the centre are less well differentiated and will be less compelling. Few insurance brands sit on the outside rim indicating that most insurance brands are not strongly positioned. Many brands are piling advertising spend into campaigns that address the Freedom need we estimate that more than 40% of insurers adspend is targeting this territory, which represents only 14% of the market. But few of the brands are addressing the need very well. In all territories there are opportunities for brands to be single-minded in addressing key groups of customers. Relatively few insurers are focusing effectively on a particular need this goes a long way to explaining the lack of differentiation, with the consequent low appeal and involvement and loss of value for both consumers and insurers. 20

Strongly positioned Restoring value to General Insurance 21

Irresistible brands The TNS NeedScope tool is specifically designed to help clients drive growth by creating irresistible brands brands that meet consumer needs in the most compelling way. The more strongly positioned a brand is on the NeedScope oval, the more irresistible it is to potential customers. If a customer is in a specific needstate and finds a brand that is strongly positioned in that territory, it is irresistible: they know instinctively that that is the right brand for them. Irresistible brands: And by using NeedScope it is possible Analysis of 1000 brands has discovered to identify the strongest growth that higher IQ scores are closely aligned opportunities by calculating an Irresistibility with increased brand usage a higher IQ Quotient (IQ) for each brand: a rating from score correlates with higher sales. 0 to 100 based on how irresistible they are in each needstate. Relationship between brand irresistibility and usage 350 300 Meet a specific customer need or needs in the most compelling way Understand that it is not possible to be irresistible to everyone Deliver growth Irresistible brands achieve faster growth through gaining a deep understanding of a consumer need and setting out to address it in a single-minded way. The brand becomes the natural choice for the consumer, who is then less likely to make a choice that is based purely on price. Brand Usage Index 250 200 150 100 50 0 0 10 20 30 40 50 60 70 80 90 100 IQ (Irresistibility Quotient) NeedScope database of 1,000+ brands from 2009 to 2013 22

How insurance brands are performing In general, insurance brands perform relatively poorly on Irresistibility Quotient (IQ) scores. The average IQ score for General Insurance was 59, with several brands scoring around or below 50. As a brand s IQ score among target consumers increases, their use of the brand increases. An IQ score of 50 has no usage advantage but an IQ score of 60 and above in the target needstate drives a real growth advantage. Twelve General Insurance brands achieved IQ scores above 60 but only three brands scored over 70. No insurance brand scored over 80, a level achieved by only 5% of the 1000 brands analysed by NeedScope. An example of a truly irresistible brand is Audi, which has an IQ score of 92, so even the most irresistible of the General Insurance brands have plenty to play for. There is a visible halo effect at work for some types of provider for example, retailers, which have a generally positive image with their customers, tend to have higher IQs than banks, which have a generally negative image. General Insurance IQ scores by insurer type 70+ LV Bupa Legal & General First 60+ AXA MORE TH>N Swinton NFU Mutual Churchill Halifax 50+ High street banks insurance brands Traditional insurance players! To find out how your brand performed contact: maureen.duffy@tnsglobal.com Restoring value to General Insurance 23

Focus delivers growth The highest IQ scores denote the most compelling brands in particular needstates, rather than across the board. The potential for growth comes from the focus on a particular need. Strongly positioned For example, Tesco and Hiscox, with IQ scores over 70, have achieved that in their chosen needstate Tesco in Simplicity and Hiscox in Control. In contrast Hiscox only scores 32 in Simplicity and Tesco scores 34 in Control. The NeedScope tool can also look at What If scenarios and identify the actions likely to bring the greatest return on investment. This can be the impact of communicating certain brand values more strongly, to changes to the product or customer service offer. 73 32 34 72 24

How ads are performing As part of the study TNS also tested a number of TV adverts to see how they are working against the different needstates. The Burglary ad for More Th>n successfully addresses the thinly populated Reassurance need, and Spoons for Churchill resonates strongly in the densely populated Freedom territory. Burglary performs really strongly against the attitudes and needs of those in Reassurance. It s a highly emotive communication with a strong sense of empathy, which leaves a feeling that the provider is thoughtful and really understands its customers, and that they will be protected and reassured if something happens. The Spoons ad for Churchill hits the Freedom spot very strongly; it delivers strong emotive values of being carefree and upbeat. The ad won t resonate with everyone, but customers in the Freedom need territory will instantly know that Churchill is the type of brand for them.! To learn how your TV advert performed contact: maureen.duffy@tnsglobal.com Restoring value to General Insurance 25

The way forward 26

Insurers can get closer to their customers The challenge for insurers is to move out of the low-involvement and price dominated world that has been created in recent years. A world in which consumers feel a sense of distance from their insurers, where the relationship is characterised by distrust and the product has become commoditised. The aim should be to move into a more thoughtful world, in which companies can re-create their relationship with their customers and build healthier, fastergrowing brands. To create a marketplace that pivots around a renewed sense of value. In this more thoughtful world, insurers would think carefully about what type of customer to focus on and deliver to. They would then set about addressing those customers in a clear-sighted, single-minded way. Customers would become more involved, thinking more about what they are buying and their choice of provider. In this marketplace, the emotional and financial value of the insurance policy would take centre stage. The benefits of such a change lie not only in growth opportunities for companies, but also in potential gain for the industry as a whole. Changing the market convention Low involvement world Distrust More considered world Thoughtfulness Insurers Customers Insurers Customers 28

Using NeedScope to drive change NeedScope was developed by TNS to help to create irresistible brands and to realise their growth potential. This is based on four key steps: Optimising the Aligning 1 brand ambition 2 3 4 touchpoints Innovation Monitoring By identifying the needstate that represents the greatest opportunity for the brand we can help refine brand values to deliver strongly to those needs. Beyond this we can ask what if we are able to develop the identified values and demonstrate the potential ability to recruit more users from that segment. We can evaluate the positioning of all key touchpoints to ensure that the brand values are reinforced whenever customers experience the brand. By identifying under-delivered needs in the target needstate we can fuel proposition development that will both strengthen the brand and provide a competitive advantage. Tracking the performance of the brand over time is crucial to ensure the positioning ambition is realised and to identify any competitor movements that may represent a threat. Restoring value to General Insurance 29

TNS can be your partner for growth TNS is the world s largest custom research company we have more conversations with consumers than anyone else. Our focus is on generating actionable insights that drive growth for our clients. We have world-leading expertise in advising clients on brand management and customer loyalty. To find out more about how we can help and about the insights for specific companies that emerged in our latest research contact: maureen.duffy@tnsglobal.com 30

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