To compete effectively in the switching economy, life insurers have no choice but to play to win.

Life insurance customers are more demanding than ever, and those who don’t get what they want find it easier than ever to switch providers.   

Accenture research indicates that one in 10 life insurance customers will take out a new life insurance contract with a new provider within the next twelve months, and that seven percent of customers are very likely to stop doing business with one of their insurance providers over that same period.

While life insurance is less volatile than property and casualty insurance – where research shows that 40 percent of customers are likely to switch providers in the next 12 months — there is still an enormous amount of premium income at risk in what we call the “switching economy”.  This premium income is up for grabs, and those insurers that are best placed to meet customers’ demands have the best shot at taking it away from their competitors. 

Most life insurers have been playing to avoid losing, but this only works as long as all competitors adopt the same strategy. To compete effectively in the switching economy — and to keep their own customers from switching — life insurers have no choice but to play to win. 

Playing to win may mean taking more aggressive approaches, using digital innovation to offer customers better prices, more relevant services, or both.  Price – or, more accurately, value for money – is a key element in switching. 

In life insurance, novel start-ups are using digital technology to lure customers who are reluctant to pay the fees that many advisors charge.  For example, FutureAdvisor invites clients to supply all of their financial data along with sufficient personal data to create unique investment profiles.  Its software program applies investment best practices to its customers’ portfolios, sending them regular, impartial recommendations for optimizing their investments. The service is free; customers only pay when they commission FutureAdvisor to carry out the changes on their behalf, which they are likely to do only if and when the advice proves to be sound. 

Digital technology is also having a huge impact in making it easier for life insurance customers to research alternative providers’ value propositions, and promoting the “click and change” mentality seen throughout the retail industry.  In life insurance, customers see themselves less as purchasers of products, and more as architects of the lifestyle to which they aspire. 

Life insurers must place bets and take calculated risks to keep their current customers and attract those thinking about switching. To create experiences that are valued by customers, life insurers should focus on five key elements:

Customer relevance.  Insurance customers expect their providers to know them, and to act accordingly.  This opens up opportunities:  More than 40 percent of customers in our study said they are willing to pay more for personalized advice or assistance when purchasing insurance, and that number has increased by six percentage points since 2010.  To be customer-relevant, insurers must be able to share customer preferences, interactions, and other data across channels, and to predict customer behavior top personalize interactions.

Relationships at scale. Technology is making it possible to replicate, for the mass market, some of the intimacy of the old-style insurance agent who knew his customers personally.  For example, cloud-based customer relationship management solutions can help life insurers develop a single view of the customer across channels and lines of business. 

Seamless experience.  Agents and brokers are holding their own, especially in life insurance.  But customers want to be able to use multiple channels to interact with providers.  They do not want to receive inconsistent offers on different channels, but they do want to be able to buy products and services using the channel of their choice.  Inherent mobility.  We found that 67 percent of insurance customers are interested in new services offered on mobile devices.  New competitors such as banks and retailers are exploring mobile to offer life insurance, among other products.  Expanding opportunities for mobile interaction and support should be a key priority in improving the overall customer experience. 

“Natural” social media. The proliferation of social media has fundamentally changed the way people interact with each other, and with their service providers.  Rather than being a distinct channel, social media are now just another way for consumers to communicate, collaborate and get information.  Successful life insurers will empower their agents to make the most of social networks, both to be where the customers are and to increase their own productivity. 

Insurers hoping to take advantage of the $400 billion switching opportunity have little choice but to undertake a digital transformation to enhance channels and the customer experience.  Life insurers need to be able to deliver the experience that customers want and demand, but for many carriers this will require a transformation of their entire value chain. 

Life insurers that play to win by providing relevant, personalized products — using digital technologies to meet rising customer expectations — are most likely to succeed in this volatile, high-stakes environment.