Consumer expectations continue to evolve at a mind-boggling pace. Insurers are going to need to become much more agile if they hope to keep up.
None of us have been through a pandemic before. So it’s difficult to anticipate exactly how people are going to respond to the various phases of this situation. Or how their needs as consumers will evolve — what consumers wanted at the start of the pandemic may not be what they want or need today.
That is why, over the course of the pandemic, professionals from KPMG International have been surveying consumers to find out how their preferences and behaviors have changed and what insurers can do to keep pace. The Consumers in the New Reality (PDF 2.3 MB) series has included around half a dozen ‘waves’ of consumer outreach, involving more than 75,000 consumers across 12 markets. The findings have deep implications for insurers of all types and sizes.
The first finding that pops out at me relates to the economic impact that COVID-19 has had on consumers and their demand for insurance. Our survey shows that, even in consumer segments directly impacted by the economic implications of the pandemic, what consumers want is protection. That is manifesting, in part, as a prioritization on savings. But it is also leading to a notable rise in the number of consumers who are investing into insurance policies.
Almost a fifth of consumers surveyed said they had changed their auto insurance coverage as a result of the pandemic. Thirteen percent said they had made some changes to their home policies. Just one-in-ten told us they had changed their health insurance plan; few seem willing to change health providers in the middle of a global health crisis.
What I find particularly interesting, however, is that 12 percent of consumers reported they were now investing into life insurance policies — a product that, traditionally, has been viewed as a grudge purchase. Our data also suggests we may be starting to see a notable decrease in the average age of first-time life insurance buyers as a result of the pandemic. Encouraging news for the life insurance sector.
Another trend that clearly has risen from our survey is the demand for increased use of digital. When we asked consumers what was most important to them when it comes to insurance, 40 percent said ‘efficient claims processing’. Just over a quarter said they wanted clear ways to contact their insurers. More broadly, they told us they are looking for personalized products that meet their unique needs, as well as more innovative products that can help them deal with the challenges they are facing today.
Responding to each of these expectations will require insurers to enhance their digital capabilities significantly. Indeed, digitization is key to delivering innovative, personalized products and services in today’s economy. It is also essential to delivering improvements such as automated claims processing and digital chatbots.
Over the longer-term, the move towards digitization can also help insurers reinvent their models by, for example, reducing their reliance on agents and building more personal relationships with their clients. It can also unlock valuable cost benefits and drive new insights in areas such as customer analytics.
Getting there will be a challenge. Many insurers are still tethered to their legacy platforms and are struggling to activate their digital ambitions. But digital transformation is inevitable. And the most progressive organizations I see are now moving quickly to make the change (and partnering with a range of FinTech, InsurTech and RegTech companies to catalyze speed and inspiration).
Ultimately, what consumers are really looking for is trust. And in that respect, our data suggests insurers are delivering on customer needs. In fact, our survey shows that trust in the insurance sector is now higher than it was before the pandemic.
Some of this newfound trust can be attributed to the specific actions many insurers took to protect their policyholders in the immediate phases of the pandemic. From adding free COVID-19 protections to health policies, through to returning a percentage of premiums to reflect lower driving activity during the pandemic, insurers around the world demonstrated their commitment to caring for their customers.
At the same time, some of the trust is directly related to the ‘halo effect’ of the industry: the core value proposition of insurance is to protect people in their times of need. Given consumer’s deep desire for protection and security right now, I’m not particularly surprised that trust in the industry has been boosted. But that halo effect will likely not stay for long. Insurers will need to refocus on building trust themselves if they hope to retain its effects.
The findings of the survey – taken individually – are important to understand. But what I believe is more important is to see is how these trends (and others transforming the industry) are coalescing to create new opportunities for insurers.
Better digital capabilities, for example, can help insurers personalize the conversation which helps build trust. Digital can also help insurers create new and innovative products that allow them to move from protection to prevention and care (through, for example, remote monitoring of sensors on cars, homes or even hearts).
Regardless of what nuances you take from this survey, one finding is blatantly clear: consumer behaviors, needs and preferences continue to evolve rapidly. Insurers will need to be agile if they hope to keep up.