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Life Insurers Need Sharper Focus on Consumer Needs and Preferences

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Life insurers looking for profitable growth are facing strong headwinds, not just from volatile economic conditions, but from changing consumer attitudes. The findings of a recent Accenture survey of more than 7000 global customers sum up the growth challenge facing life insurers. 

Almost two-thirds (65%) of life insurance  customers said they either do not understand what payout they will get at the end of their contract term or have only some understanding and need further information and clarity.  Over three-quarters (76%) of respondents said they either did not understand or needed more information and clarity on the annual commission their insurance agent earns from their policy contract. And a similar number (77%) lacked a full understanding of how much they will pay in taxes when they surrender  or close their policy.

 To learn how insurers are responding to these challenges, we also undertook a survey of 119 C-level insurance executives, equally divided between life and P&C carriers. These executives understand that the landscape has changed, and that a carefully crafted strategy is needed to provide the differentiated, tailored experience which consumers now demand. 

An approach is needed that addresses customers’ clearly stated preference for more relevant, convenient and innovative products, services and channels. By focusing on the overall customer experience, life insurers can create a more durable competitive advantage, one that allows them to price realistically while building customer loyalty.

Most insurers recognize the need to provide a more meaningful customer experience, with more than 90% regarding rising customer expectations as an important or critical challenge as they strive for organic growth. Other priorities include managing customers’ growing reliance on independently sourced information to make their buying decisions and making policy information more readily available via preferred channels.

In addition insurers need to create more touch points with their policyholders over the duration of the contract, to build differentiated relationships and provide meaningful customer experiences. At a time when customers are clamoring for something special, only a small minority of insurers rate themselves as front-runners in the provision of a differentiated, tailored customer experience, despite the fact that 95% believe growth will be elusive if they fail to provide a special experience.

A strong analytics capability is essential to gaining a deeper understanding of customers’ needs and addressing them in targeted ways. Insurers have, on average, invested less than $12 million on analytics over the past three years, although 72% of insurers say this figure needs to be increased.  Our cross-industry research indicates that robust analytical capabilities are essential to success, and that top-performing companies are five times more likely than lower-performing companies to have identified analytical capabilities as a key element of their strategy.

The first step in treating customers as if they are special is knowing what would make them feel special. Life insurers have always had large amounts of demographic and transactional data about their customers, as well as the analytics to make sense of it. However, most of this was used to answer the question: “What happened?” (In other words, who bought this life policy?) Access to new sources of data, both internal and external, and improvements in data consistency and distribution, allow for much richer insights.

These, together with advances in predictive analytics, help answer the question: “So what?” For insurers, this translates into “How will my customer behave? What are his or her interests, and what will happen?”

Predictive analytics also allows life insurers to segment their customers into homogenous groups sharing similar traits, needs and expectations. This, in turn, enables them to develop different strategies, or “treatments”, optimized for specific customer needs, attitudes and intentions. Predictive analytics is particularly valuable in determining which customer characteristics are most significant and represent the best opportunities for differentiated treatment.

We believe the keys to high performance in life insurance include the provision of a clearly differentiated, more meaningful customer experience. Most life insurers would acknowledge that their products can no longer provide sustainable differentiation.

Many would also concede that the advice that accompanies their mass-market products is so standardized as to offer little personal value, while their affluent customers are moving away from commission-bearing, advice-intensive products, preferring to retain independent advisors working on a flat fee.

This is why the focus must shift to a tailored, branded, scalable, multichannel experience—but this will not be easy. Most organizations are structured around products, with budgets, profit and loss statements, and influence aligned within product silos.   This product-centricity is reinforced by operating models, processes, governance and infrastructure.

To become customer-centric, many firms begin with analytics and segmentation, which allow them to concentrate on go-to-market strategies based on insight-driven, actionable customer segments and business priorities.  Our research confirms that the majority of insurers are currently investing in analytics, and in the ability to improve segmentation and provide customers with a tailored experience – and that they intend to continue doing so.  Whether they deliver low-cost, commoditized products or high-end, advice-driven solutions—or a combination of both—insurers need the insights derived from the best available analytics capabilities.

John L. Del Santo is the managing director, Global Insurance Industry, for Accenture, Chicago, Ill. Daniele Presutti is managing director of Accenture Life Insurance Services.