In mid-May we surveyed over 1500 consumers on different aspects of their lives and their relationships with insurance, superannuation and advice products and services. KPMG International then performed the Consumers and The New Reality survey (PDF 2.4MB) across 12 different countries, including Australia, in early June that focused on changing consumer needs, behaviours and expectations – both reports delivered the same findings.
The financial impacts from COVID-19 were significant and far reaching. Consumer spending, attitudes and sentiment to products and services, preferences to propositions and service channels have all been affected.
In the survey, nearly half of respondents’ financial positions had declined in the pandemic, and 68 percent had reduced both their overall and discretionary spend. There was still a degree of optimism, with more than two-thirds either confident or neutral to the prospects of a recovery over the next six months, although those whose jobs had been impacted were more focused on ‘getting through’ the crisis.
Rising expectations was a key theme in the study, with a majority now expecting better value and more flexibility in the provision of financial services. Consumers have been increasingly shopping around the best value products and are more likely to switch providers, with younger Australians financially impacted by the COVID-19 crisis much more active in doing so.
The survey found that the pre-COVID-19 trend towards increased online access of insurance, superannuation and financial planning services has accelerated during the shutdown, with consumers of all ages increasingly seeing digital as the ‘new normal’. There is however a clear generational divide with most under-40s believing digital leads to better quality engagement while just 29 percent of over-65s agreeing.
Our survey finds clear signs among consumers of a 'refusal to return' to the pre-COVID-19 ways of interacting with their providers. There is a new consumer expectation that businesses will offer greater value for money and be more flexible in the services and products.Those brands that fail to meet higher expectations in delivering a world-class digital customer experience risk being left behind.
The report found a consistent increase in support for digital contact methods during the COVID-19 era across consumers – whether they had previously preferred this approach or not. Email was preferred – 36 percent with live chat and mobile app next on 28 percent and online portals at 27 percent, with convenience, accessibility and time-saving the key benefits, especially for older Australians. A majority (72 percent) of respondents still wanted traditional contact methods as a back-up option if extra help with their queries was needed.
Only a small majority (51 percent) pre-crisis had favoured digital methods for engaging with companies. Among those who preferred communicating via telephone, preference has increased by 10 percent for digital channels; and for those that preferred face to face, preference for digital has increased by 14 percent. But those who still preferred face to face contact were keener than ever to do so, after experiencing weeks of shutdown.
The survey showed a large increase in two-way engagement between providers of a wider range of services – including mobile phone and utility companies as well as insurers and super funds – and those consumers who had either lost their jobs or had reduced hours or salary during the crisis. Younger people and those whose job has been impacted by the pandemic, were more likely to have reached out to a range of providers than older Australians.
The research identifies three consumer types that emerged during COVID:
Surviving: Likely to have lost their job (10 percent of survey respondents) and have experienced a significant drop in income, is reliant on government assistance. Likely to completely halt any discretionary spend. Generally more concerned about their financial situation than on health, and likely to be younger, or those in part-time work.
Preserving: Likely to have had income impacted through reduced hours or wages (32 percent of survey respondents), and may be reliant on some government support. Likely to limit carefully scrutinise discretionary spend, and look for ways to preserve financial situation.
Steady: Little impact to financial situation (58 percent of survey respondents), and less concerned with spending but may limit discretionary spend anyway, given general uncertainty about future economic outlook. May also be more focused on maintaining and preserving their health.
Analysis by sector
Insurers have perhaps been most affected in terms of consumer expectations in the pandemic, with many people now more aware of what their policies do and do not cover. More than 70 percent wanted better value for money from their insurance, and one-third of consumers are either switching providers or considering cancelling policies in the next 12 months – 20 percent health, 25 percent life, and 38 percent Income protection.
Many customers now expect a complete rethink on health, travel, life and income insurance due to current financial pressures they face and nearly half are now looking to insurers to include ‘prevention’ approaches to likely causes of claims rather than insuring against them. Home and car insurance were still largely seen as essential purchases although even these saw one-third of consumers expecting some sort of help from providers. Two-thirds also said the claims experience was more important to them in the current crisis.
Private Health Insurance (PHI) is an area of particular focus among consumers, with 48 percent expecting prevention services from insurers and more than one-third of consumers considering lifestyle changes to limit the need for PHI. One-third had reviewed and made changes to their policies since COVID-19; and almost two-thirds believed PHI approaches needed a reshape. The positive news was that 41 percent believed it was more important now to hold PHI given the pandemic – the largest growth of any insurance category.
Super funds are also under unprecedented pressure in the COVID-19 era. There has been a large-scale withdrawal of money, by younger Australians and those who have suffered job or salary losses, under the early access scheme. Around 70 percent saw super as essential – a lower figure than home insurance – while only 59 percent were satisfied with their provider and 12 percent expected to switch funds in the next 12 months. Here there was a clear divide between retail fund members, of whom 23 percent were likely to switch and industry funds where the figure was only 9 percent. Those furthest from retirement age were relatively more likely to switch, and more likely to feel they had not yet made adequate provision for their retirement.
Half of consumers said they were now more aware of their super balance since the crisis, 57 percent said they needed to review their investments, and nearly half said they had had their savings and retirement plans interrupted by the pandemic. More than 70 percent said they expected greater flexibility in terms of products and services on offer while a majority wanted better service and value for money.
Super funds do need to increase engagement with members – the survey shows it is less frequent than in other financial services areas. Nearly two-thirds expected to be able to deal with their super provider wholly digitally and this is an area which many funds are addressing, but they need to focus on operational improvements even more to meet expectations.
Financial planners have a mixture of good and bad news from the survey. While more people now see this as a discretionary spend, and a majority are not prepared to pay for it, those that do use these services see them as essential. More than 70 percent were satisfied with their financial planner, compared to 59 percent for their super funds. While more have reviewed this service than any other in the COVID-19 era, there has also been greater engagement than in insurance or super, and planners have been more pro-active in contacting customers. More flexibility in both the services and products they provide and in how they engage – with two-thirds of consumers keen to keep this wholly online – were also clear findings.
For full survey results, please download the report.
If you have any questions regarding the content of this article and would like speak to someone from our team please contact us.