As insurance businesses across the UK prepare to welcome back their colleagues after a hugely challenging 18 months, there is also an understandable feeling of apprehension (and some excitement) in places across the personal lines market, as it faces into one of the biggest market shifts of recent times.
With the changes mandated by the FCA around pricing, we are about to embark upon a significant shift which will see removal of loyalty penalties, eradication of price walking and providers working harder than ever to attract and – most importantly – retain customers.
Fundamentally, following increased regulation and the advent of price comparison, insurance buying decisions have been predominantly price driven. Volume and scale have become increasingly important and while the market has been competitive and functioned fairly well for a number of years, for both businesses and consumers, the time has come for more. Excellent customer service and product innovation have of course existed in pockets across the market, but now both will need to become widespread and, in addition, brand, cover levels, and experience are about to play a bigger part in what will be a more balanced buying process for customers.
So, with commentators predicting these changes could be costing the industry more than £300 million to implement, with significant ongoing costs too, how can providers use this investment and market turning point as an opportunity to earn trust and alter customer perceptions once and for all?
- Data: Insurance policy pricing is based on the analysis of sophisticated risk and propensity profiles. Therefore, as an industry, we know how to use this insight to drive net and gross prices. However, using it to also drive better customer service and satisfaction will provide the right catalyst for growth. The use of insight will increase further in the near future and will mean the difference between winning and losing. Much data has been ‘mined’ and analysed over recent years, but little has created sustainable competitive advantage due to the market-wide ‘arms race’ we have engaged in. However, for those brands that already have a deep relationship with a loyal customer base – for example in the banking arena, they are very well positioned to drive opportunity, innovation and improvement from the post Market Study trading environment.
- Optimising the digital experience: Throughout the pandemic, we witnessed a multitude of consumer behavioural changes and with this, a newfound confidence from many to manage their finances and household bills digitally. While the insurance industry has been slower on digital adoption than some, the lessons we’ve learned around speed and agility and the investments we have made in areas such as AI and Digital Voice are beginning to pay. Allowing customers to interact in any way they choose and at a time of their choice, will be crucial as we navigate the new era.
- Placing the customer at the centre of everything: Above all, these changes are being implemented in the expectation the industry will reflect on its actions and genuinely put the customer at the centre of decision-making. For a sector that claims to be customer-centric, these changes give every provider a chance to re-set and prove it. Although price remains important, for the first time for many years, providers will have a better opportunity to nurture and build long lasting relationships with customers, eventually earning that loyalty. We have the opportunity to take bold moves, to shift the insurance model – from a once a year grudging purchase, to one that offers value, peace of mind and support throughout the life of a policy. This could provide a real point of inflection.
So, while it remains to be seen how we organise ourselves for the January 2022 changes, how we collectively navigate the next 12 months will generate one of the most interesting but potentially volatile periods our market has ever seen. While such a major shift can lead to uncertainty, a market environment that encourages and rewards innovation, creating opportunities within an industry that has been ripe for disruption for a long time, is incredibly exciting.