While many intermediaries believe that price comparison websites represent one of their biggest threats, the insurance industry is facing a different digital threat when it comes to personal lines business.
Like other industry sectors before it from entertainment and travel to banking and telecoms, insurers are seriously considering the threat they face from what are known as the ‘disruptors’. Kodak and Blockbuster are two big names that were brought to their knees by digital innovation and many believe that the insurance sector is ripe for disruption by digital businesses outside the industry.
The biggest issue that insurers face is a lack of customer trust. It’s been a long-standing challenge and one that some would argue the industry has done little to address. Well the view from outside is that unless insurance companies are able to build trust with their customers, they will be ripe for the picking as new players enter the space as they have done in practically every other area of financial services industry.
GoCardless, for example, has exploited the lack of trust in banks and the business has secured more than 30,000 customers and year-on-year growth of 600% after it disrupted the direct debit world just three years ago.
There are already some signs of disruption in the insurance industry. A peer-to-peer car insurance business called Guevara (regulated by the FCA) allows individuals to pool insurance premiums online to save cash. Any premiums left in the pool at the end of the year stay within the group or are used to lower everyone’s premium the following year. There is a similar business in Germany, Friendsurance.
Insurers are also acknowledging that customers don’t necessarily want to buy insurance the way that insurers have traditionally sold or packaged it up. Is it old-fashioned, for example, to have to buy a 12-month policy? Should there be seasonal products? And is selling on price simply a race to the bottom?
It’ll be interesting to see how the industry develops over the coming months, however at the end of the day customers want great service and it’s that service that builds a trusting, long-term relationship.
That’s clearly something that intermediaries understand well. Your businesses are built on delivering great customer service and earning the trust of your customers. I personally believe that is your biggest weapon in combating the threats that your businesses face to their success. Offering transparency and flexibility are central to your service and those are two qualities that customers increasingly value.
However, no-one can rest on their laurels in this digital age where it is all too easy for customers to air their views if they feel they’re not getting the service they deserve. Keep an eye on what’s going on in the insurance industry as well as the financial services sector in general and stay in touch with how your customers want to purchase their financial products so that you can ensure you meet their needs (within the rules of the regulator of course!), and retain their trust and custom.
