Banking Review

Consumer clout

In the US, power in the insurance paradigm has been strictly handed over to the consumer. Australian companies can easily learn from this example.

Few industries have been challenged of late like the general insurance market.

New players, hungry for revenue in a recession-proof sector, have launched a raft of online and innovative car and home insurance players. However, when it comes to helping the customer achieve their objectives, being cute and online is a poor replacement for a solid customer experience.

New players like Youi, the Buzz Insurance, Real Insurance and even Coles have been driving nervousness among the more established players.

Global Reviews recently conducted a benchmark of 13 insurers in the home insurance sector including traditional players RAC, AAMI and Allianz. The benchmark focused on the quote and apply process. The top score was only 57 per cent, None of the new players really challenge the insurance paradigm as has been done in America indicating an opportunity in the market during a period of intense competition. With the vast majority of customers seeking three or more quotes, the prospective customer is conducting their own benchmarking exercise as they compare their quotes online.

The strengths of the industry were in the core areas of entering personal information (industry average: 60 per cent), property information (71 per cent) and payment details (62 per cent).

The challenge for the sector was managing customer expectations at the initial stage of the quote/apply process. This does not need to be a separate introductory page but administrative information such as required documents and likely length of the application process can be provided within the form itself. Failure to do so increases the likelihood of customer frustration when they realise they lack the documents or time required to complete the process.

If the frustrated customer wishes to save the quote part-way through, they will be in luck because nine of the 12 sites assessed have a feature to save the quote or application. This is key in a sector where customers obtain so many quotes. Unlike the US and UK, Australian insurers are yet to embrace on-site comparisons of competitors. Companies fear that customers will not see them as objective but given the strict regulations of the ACCC, customers will appreciate competitor information. In the US, esurance even shows companies that are cheaper and enables the sign-up process to take place. If they are going to lose the customer anyway, they may as well take some value on the way.

Where’s the innovation?
The innovation of the moment is Youi asking a great many number of questions so it can carefully calculate the risk of giving you insurance and offer you a sharper deal than competitors.

In car insurance, Real’s Pay-as-you-Drive insurance seeks to cut down the premium by guidance on how much time you spend in your car. None of the new players really challenge the insurance paradigm as has been done in America. The US has seen a dramatic empowerment of the consumer. In Australia, we select one of several insurance options and include or exclude some optional extras. In the US, companies such as esurance, offer the customers the ability to customise their cover almost entirely. While starting with a core product, they enable the customer to decide to turn up, down, on or off various elements of coverage. Then the website automatically recalculates the price the customer would have to pay to receive the coverage they have requested.

The other approach, by companies such as Progressive Direct, also empowers the customer. Rather than selecting a pre-defined product or customising the coverage you want, Progressive Direct allows customers to select the amount they wish to pay each month/quarter/ year and then the website recalculates what coverage the company will provide for that sum of money. The freedom and empowerment of esurance and Progressive Direct are likely to be attractive to consumers in Australia. Progressive Direct recently revealed pans to enter the Australian market.

Customers rate an easy quoting process as the third most important factor behind brand and price when deciding on which insurance to purchase. By the time they reach your website, you can’t influence the price and the brand image has most likely been built. The opportunity lies in the quality of the website and this should not be underestimated.

Almost irrespective of price and brand, if the customer struggles with the website to purchase insurance, they will abandon the process. If you’re cheap, they will try hard to complete the process but if the form is malfunctioning or they find it frustrating, they’ll move on to a more expensive but better designed competitor.

Adam Goodvach is the chief executive officer of customer experience benchmarking company Global reviews.

goodvach