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.