20130204 Global Consumer Insurance Survey 2012 America

7/28/2019 20130204 Global Consumer Insurance Survey 2012 America

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Americas

Voice of the customer

Time for insurers to

rethink their relationshipsGlobal Consumer Insurance Survey 2012


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Contents

Executive summary 2

01Life and annuity (including investments) 5Our survey explores the following myths:

1.Customers have low condence in the life and annuity industry

2. Life insurance is sold, not bought

3. Personal interaction is essential

4. Its hard to cross-sell to existing customers

5. Providers cant inuence persistency

02Property and casualty 21Our survey explores the following myths:

1. The future is online

2. Its only about price

3. Good claims experience builds loyalty

4. Customers dont respond to cross-selling

5. Insurers cant inuence customer retention

Global methodology 35

Contacts 36


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1

Faced with the unprecedented challenges of troubled nancialmarkets, changing regulatory oversight and economicuncertainty, there is a risk that some insurers may not belistening and responding to the most important voice of all that of their customers. For any insurer hoping to navigatethrough this difcult time, understanding how customerbehaviors and attitudes are changing is critical. Previousassumptions and received wisdom about customers may nolonger be reliable, and those insurers who are able to respondbest to what customers want now are most likely to succeed.

In light of this, Ernst & Young conducted a groundbreakingsurvey of insurance customers. Working with the research rmIpsos, we set out to test the received wisdom by interviewing5,000 consumers of life and annuities and property andcasualty products in the Americas between August andOctober 2011, as part of a global survey covering 23 countriesin seven regions around the world.1

Global ConsumerInsurance Survey 2012 Americas

1 For a full description of the global methodology used to create this report, please see page 35.

24,000Global customers

7Global regions

23Countries

Brazil Canada Mexico

US


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2

In our Americas survey, we interviewed customers in the US, Canada, Brazil and Mexico. While the twomature markets are similar in wealth and demographics, the markets in Mexico and Brazil are verydifferent from each other and, as expected, very different from the US and Canada. Brazil is experiencingtremendous economic growth and has a developing middle class. Insurance, which was once a luxury

affordable only for a few, is gradually becoming a necessity to protect the assets of the new middle class.Mexico, on the other hand, is just beginning to experience growth in insurance markets. Coverage is still aluxury, available only to the wealthy and to those who receive coverage through their employer.

Regardless of these differences, however, our research uncovered strong similarities across countriesand evidence that customer behaviors in the Americas are changing. Across all countries, customers aredemonstrating a desire to be better informed, more involved in purchase decisions, rewarded for theirloyalty and to have product choices that meet their changing needs.

As a result, we believe that insurers in these markets will need to think differently if they are tounderstand where the myths end and reality begins, and to continue to be successful in attractingcustomers, deepening their understanding and building lifetime customer value.

Americas life and annuities (also known as life and pensions) key ndings

Consumers generally trust the industry, want to remain loyal and in fact buy more from the sameproduct provider.

Consumers understand their insurance needs and know what they want from providers and products.

Over two-thirds of consumers in the Americas are currently passive buyers, doing very little researchbefore buying the products they currently hold.

In the future, Americas consumers have indicated that they intend to conduct much more researchwhen purchasing products. Consumers are becoming more independent and using objective sources,particularly online, to research which products to buy. However, the majority of consumers still wantpersonal interaction when actually making a purchase, stating that products are too complicated andthey dont know which products meet their needs.

A growing minority prefer to buy without any personal interaction. This trend for independence wouldindicate that consumers will demand greater simplicity and transparency to help them make better-informed decisions and take greater control of the purchasing process.

Consumers have become accustomed to having their loyalty rewarded by non-nancial consumerservices industries and increasingly expect the same from insurers. To increase their share ofcustomers wallet, insurers must reward loyalty.

Consumers are receptive to targeted cross-sell offers if the value proposition is clear and the process iseasy and convenient.

Insurers need to respond exibly to customers changing needs. Product design begins withunderstanding your customer segments so you can design your brand and products around them.

The combined impact of these ndings is simple but profound: insurers need to become ascustomer-focused as other consumer businesses and deliver a genuinely customer-centricexperience. This means:

Providing simple and transparent products that customers can buy with condence

Making it easy to access relevant products and information throughout the product life cycle,particularly online

Building trust by delivering a great customer experience and responding to customers changing needsthroughout the life cycle

Rewarding customer loyalty

Executive summary


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Americas property and casualty (also known as non-life insurance) key ndings

Online research channels are important to all consumer segments, and their popularity is expectedto grow.

Customers clearly voiced a desire for simultaneously improving online access while continuing withpersonal contact when it matters, for example during all critical phases of the product life cycle,particularly when extending coverage, making a claim, or dealing with other customer service issues.

Insurers need a multichannel strategy that matches customer expectations by combining clear productinformation to new buyers and a simplied renewal process for returning customers.

Insurers have to be able, seamlessly, to integrate online and ofine channels to meet changingcustomer needs over the product life cycle.

Price is an important component of value, but as pricing converges through greater informationavailability, other value factors such as brand and product features become more important. Its not

just about price: you have to build your brand and provide world-class customer service too.

A good claims experience is expected in Canada and the US. In Brazil and Mexico it can still be a

differentiator. However, a bad claims experience will drive down retention and diminish brand value inany territory.

If insurers understand customers needs and offer the right propositions in the right way, they cancross-sell, up-sell and repeat-sell effectively.

Having an effective customer retention function that segments the customer base, targets thosewho are most valuable (and likely to switch) and communicates with them proactively is becomingincreasingly important for insurers to boost retention and protability.

Insurers can protably inuence retention in many countries. They need to leverage their data andempower their staff to demonstrate to policyholders that they value their customers. Loyalty matters customers should feel this value as much as the insurers.

The net impact of these ndings is that in a part online, part ofine world characterized by complex

customer segmentation, delivering value has become more complicated. For property and casualtyinsurers, meeting this challenge means:

Integrating online and ofine channels seamlessly to meet changing customer needs over the productlife cycle

Ensuring technology is integrated across several different communication channels serving both salesand back ofce functions

Understanding the cost-to-serve of each segment and channel as well as the behaviors thatcharacterize each of them

Developing and managing the brand in cyberspace to develop customer trust

Developing a thoughtful and proactive approach to customer loyalty and servicing

We hope you will nd this research useful in considering how you shape your business going forward.

If you would like to learn more or review the detailed ndings, please contact your usual client servicepartner or go to www.ey.com/insurance.

David HollanderGlobal Insurance Advisory LeaderErnst & Young

Executive summary

3
http://www.ey.com/insurancehttp://www.ey.com/insurance


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We set out to explore

customers attitudes andbehaviors today, to separatemyth from reality and providesome hard evidence of whatcustomers want now.


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01Life and annuity

While there is some truth in the received wisdom around how life and annuityproducts are bought and sold, the reality is more complex. Understandingcustomers current attitudes and behaviors will help insurers determine whatthey can do better or differently to attract consumers, deepen and retainrelationships and unlock greater customer lifetime value.

Our survey explores the following myths:

1. Customers have low condence in the life and annuity industry

2. Life insurance is sold, not bought

3. Personal interaction is essential

4. Its hard to cross-sell to existing customers

5. Providers cant inuence persistency


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6

Americas customers are somewhat neutralabout the insurance industryIn the Americas, although 35% of all consumershave a very favorable or strongly favorable view ofthe insurance industry, another 37% remain neutral

and 23% have an unfavorable view.

Although our research shows that customersremain somewhat neutral on the industry, most arecondent that the product they have meets theirneeds and, with some variation, they are satisedwith the level of service they are getting frominsurers.

In fact, consumers in the Americas have highersatisfaction scores than those in other regions,scoring a 7.5/10 mean customer satisfaction ratingfor the region overall. This is higher than in Europe,

where the average score was 7.0/10, and Asia-Pacic, where it was 6.8/10. Customer satisfactionlevels are relatively consistent across the region,ranging from 7.3/10 in Canada to 7.7/10 in the US.

Insurance industry lags behind othersAmericas customers, however, feel insurers lagbehind other industry sectors in quality of serviceand in rewarding loyal customers.

A full 39% of Americas customers tend to agreeor strongly agree that the insurance industry lagsbehind other industries in service, and 37% areneutral on the topic, representing 76% of the totalrespondent population. In addition, 78% tend toagree, strongly agree or are neutral in believingthat the industry lags behind other industry sectorsin rewarding customer loyalty.

Americas customers are more condent about

product choicesIn the Americas, 85% of customers are fairly orvery condent that they have the right product

to meet their needs. Condence ratings in theAmericas are consistently higher than in Europe(79%) and Asia-Pacic (76%).

Customers have low condencein the life and annuity industry

Received wisdom is that the nancial crisis has created mistrustof nancial services and a perception that all nancial servicescompanies are untrustworthy. Our research shows that the insuranceindustry may not have been as tarnished as other nancial servicessectors, but it still has room to improve.

7.7US

7.6Mexico

7.5Brazil

7.3Canada

6.8Asia-Pacific

7.0Europe

7.5Americas

Regional average

Country average

Customer satisfaction ratings Mean score out of 10

35%of all consumers havea very favorable orstrongly favorableview of the insuranceindustry.

Myth 1


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Life insurance is sold,not bought

Received wisdom is that because of a lack of customer knowledgeand condence, life insurance products are sold to consumers thepurchasing decision is not customer-driven. Our research indicates thatalthough this perception is still valid, it is slowly starting to change.

Myth 2


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9

Customers are becoming less passiveAcross the Americas, consumers take a surprisinglypassive approach to purchasing life insuranceproducts. They do not actively seek out lifeinsurance products unless they have very specicneeds. Less than one-third (27%) do a fair amountor a great deal of proactive research, and in Mexico

the percentage falls to 22%. Consumers in the USare the most active researchers in the region 31%research product choices.

Our research shows that this picture is startingto change. While many customers still feel theproducts are complex, there is evidence thatcustomers want to take more control when

buying a life or investment product. Customersare showing a greater desire to use online andobjective sources to inform themselves prior tomaking a purchase, and they are demonstrating aclear understanding of the factors they are lookingfor when selecting a product. In the next ve years,

customers say, they expect to exert greater controlover the buying process, with two-thirds (66%)expecting to do more independent research in thefuture, though often still relying on an advisor tovalidate and complete the transaction.

Use of online information sources is increasingCustomers want to use sources they can trust without risk of sales bias. Friends and family remaina trusted reference point, but we believe this pointof reference may begin to extend to online sourcessuch as comparison sites, blogs and social medialike Facebook where friends and family become

part of an extended online group.

As with many other sectors and products,consumers are starting to ask What can theinternet tell me about this insurer and this product,based on sources I can trust?

In emerging markets such as Brazil, as theconsumption of life products increases, consumersrely heavily on friends and family as a source ofinformation, and word-of-mouth from friendsand family remains a strong inuencer acrossthe Americas. Accordingly, current customersperceptions about product value and services

delivered may directly impact new salespurchasing decisions.

As this trend for self-directed behavior develops, agrowing number of people will take more control ofthe buying process, although many may continueto use an intermediary to complete the transaction.

Life and annuity

27%do a fair amountor a great deal ofproactive research.

Information sources consumers expect to use for future research

Bank or insurance companywebsites

Family or friends wordof mouth

42%

Direct contact with bank orinsurance company people(call center, branch)

Online blogs/communities

Online comparison websiteAdvice from intermediaryor agent

42%

Financial press/media

17%

Information fromyour employer

24%

Other online sources

21%

Advertising/direct mail fromproduct provider (bank orinsurance company)

15%

Other

4%

Dont know

10%

36%40%

32%

11%


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10

Customers know what they want from providersand productsIt is clear from the research that in the Americas,customers are buying products that areappropriate to their needs. Saving for retirementand providing for children are top priorities untilcustomers reach the 55-and-over age segment,

at which point protecting health and retirementincome becomes the top priority.

Our research also shows that customers know what

they are looking for from an insurance provider.In every country except Mexico, customers saidthat nancial stability of the provider was themost important factor when choosing a life orinvestment product. We believe that this difference

is most likely explained by the fact that mostcoverage is provided by the employer and theconsumer is given little if any opportunity to selectthe provider in Mexico.

In their research, customers are looking for factualinformation to conrm they are selecting the

right products to meet their needs. Factors suchas brand or advisor recommendation and evenrecommendations from friends and family areless important. This shows that customers wantobjective information to ensure that they make theright choice. Not surprisingly, product features,product performance and the nancial stability ofthe provider rank as the most important features toconsider when choosing a product.

66%of customersexpect to do moreindependent researchin the future.

Most important sources of information when choosing a life or investment product

Brazil Canada Mexico US

0%

30%

40%

50%

10%

20%

Family and friends

Online comparison sites

Information from employer

Life and annuity


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11

Implications for insurers

Communicate more effectively throughobjective information sourcesTraditional marketing and distribution methodsare not well suited to the emerging customer

trend that use objective and independentsources of research before purchasing. Thechallenge for insurers is to communicate theirpropositions so that objective sources representthem fairly, allowing the consumer to make awell-informed choice of company and product.

Insurers will need to project their brandreputation and product messages consistentlyand broadly, in a variety of media and to avariety of sources, ranging from traditionalintermediaries and product sponsors to theirwebsites and ultimately to the new world ofsocial media.

Prioritize social media strategies in

developing marketsThe requirement to inuence objective andindependent sources is particularly important in

markets like Brazil, where the individual life andannuity market is growing rapidly.Clearly, this goes far beyond simple advertisingand suggests providers will need to develop

social media strategies that prepare them topresent themselves and their products in astraightforward, easy-to-understand languageand terms, tailored to each consumer segmentand channel.

Harness technology to learn about consumersand tailor product offeringsFully utilizing the potential of social mediapresents additional opportunities. Technologyadvances may enable insurers to harvestpublicly available data about life events and lifestage changes and to participate proactivelyin discussions about changing insurance

requirements. This would enable insurers totarget customers with the right products at theright times.

Top reasons why consumers purchase life or investment products, by age group

0% 10% 20% 30% 40% 50% 60%

Americas

1834

3554

55+

Protecting myretirement income

Saving for my retirement Protecting my health

Providing for my children

31%of the consumersin the US are activeresearchers.

Life and annuity


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Personal interactionis essential

Received wisdom is that customers require personal interactionin order to understand their nancial needs and determine whichproducts to buy. Our research indicates that this largely remains thecase, but some customers are becoming more self-directed.

Myth 3


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Personal interaction remains important formost customersA relatively high 82% of respondents across theAmericas rate personal interaction as either fairlyor very important higher than in Europe (78%)but lower than in Asia-Pacic (89%). Customersof all ages prefer personal interaction when

purchasing, suggesting that most customers stilllack condence to buy without assistance.

Interestingly, even while researching a productpurchase, there is a strong preference for personalinteraction across all age demographics, althoughyounger customers are slightly more willing toresearch and purchase on their own.

Complexity and lack of transparency impedecustomer independenceIn the Americas, the two most common reasonsconsumers cite for seeking assistance are that theyneed expert assistance to make important nancial

decisions (52% of consumers) and that they do notknow which products best meet their needs (41%).In Latin America, the trend is more marked, with asubstantial 91% of customers in Mexico saying thatpersonal interaction is essential, very important orfairly important. These gures would suggest thatcomplexity and lack of transparency are frustratingcustomers growing desire to become moreindependent.

In Mexico, unlike in the other countries we surveyedin this region, the next most popular reason forworking with intermediaries was to get assistance

with paperwork and general administration citedby 40% of customers.

Multi-tied agents are preferred in the AmericasWhere customers do use agents, there is a strongpreference (49%) for independent (multi-tied)agents over agents tied to a single provider (16%),although a high percentage (31%) expressno preference.

A small minority are condent to go it alonePerhaps more signicantly for the longer term,the data shows that a small minority of customers,11% on average, no longer consider personalinteraction important. People in this category havebecome more familiar with insurance products andhave a good understanding of their needs and howtheir needs change over time. They are increasinglycondent about taking greater control over thebuying process. These customers, who prefer notto have any personal interaction, want completecontrol over the buying process and dont want tobe subjected to sales pressure.

82%of respondentsacross the

Americas rate

personal interactionas either fairly orvery important.

Life and annuity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Americas

1834

3554

55+

Percentage of customers saying personal interaction is important or essential when buying a policy

Researching

Purchasing


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Importance of personal interaction to Americas customers

Reasons why personal interaction matters to Americas consumers

Life and annuity

Products are too complicated

or technical

Other Dont know

3%

I dont know what products

are best for my needs

I need assistance with the

paperwork and general

administration

I dont know the insurance

companies

I dont know how to measure

the products performance

I feel I need expert assistance

to make important financial

decisions

52%

7%

41% 35%

20%22%

33%

7%

Brazil

Canada

US

Mexico

11%

78%

82%

82%

91%

11%11%

Important

Unimportant


17/40


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16

Cross-selling is generally lowOur research shows that levels of cross-sellingare indeed low. On average across the region only16% of those surveyed had bought more than oneproduct from the same product provider. Theregional average masks a big difference between

Latin America and the US and Canada: in Mexico,26% of customers have bought more than oneproduct, and in Brazil 24% have done so, comparedto only 11% in the US and 15% in Canada.

In Brazil and Mexico there are fewer competitorsin the marketplace offering a full line of products(compared to the US and Canada). This factor, inconjunction with the ease of buying from a familiarprovider could explain the higher levels of cross-selling in these countries.

Customers want to buy more products

especially in the AmericasOur research shows that across the region,customers are willing to buy multiple products fromexisting providers and in fact may prefer to do so.

Trust in the provider and convenience are the mainfactors driving repeat purchases. In the regionon average, when asked why they had purchasedadditional products, 48% of respondents stated,I trust the provider, and 44% said, It was easierto buy from a provider I already know. These

scores suggest that insurers in the Americas havea signicant market opportunity to cross-sell andup-sell their products.

Although customers are willing to buy more,they expect insurers to make it easy for them.The process has to be convenient, providing anopportunity for cross-selling at the time oforiginal purchase and via the channel of theirchoosing. Product descriptions need to be simpleso that it is easy for customers to understandwhat they are buying. In addition, customersincreasingly expect to be given incentives for

repeat purchases. Of those surveyed, 27% citeprice discounts as the top reason for buyingadditional products, and a further 25% wantadditional services at no extra cost.

Its hard to cross-sellto existing customers

It is widely believed that customers are reluctant to buy more thanone product from the same provider. Our research shows that whilecross-selling levels are low, customers are willing and, in fact, look tobuy more products from the same provider.

Customers who have multiple products with the same provider

16%of those surveyedhad bought morethan one productfrom the sameproduct provider.

26%Mexico

16%Americas

19%Europe

11%US

24%Brazil

15%Canada

Regional average

Country average

Myth 4


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Hard-selling is counterproductiveThe data shows that hard sales tactics do notwork and are often counterproductive. Of thoserespondents who said that contact with theirinsurer is not meeting their needs, many said theywere dissatised because the provider was more

focused on selling than on understanding theirneeds. The trend was particularly marked in LatinAmerica. Excessive sales pressure was cited asthe source of dissatisfaction by 47% in Brazil and51% in Mexico, while in the US and Canada thepercentages were 14% and 23% respectively.

Factors driving repeat purchasing in the Americas

Life and annuity


Invest in technology to promote cross-selling,especially in fast-growth marketsIt is clear from our research that customersacross the Americas want to buy more productsfrom their existing providers. This suggeststhat in fast-growth markets there is a hugeopportunity for insurers to build the analytics,marketing and contact strategies that facilitatecross-selling from the outset. Brand strength is

critical, particularly in markets where productsare not commoditized and trust is a key driver ofproduct preference. Pricing is also signicant,and companies must be prepared to tailorpricing and product attributes to particularcustomer segments.

Invest in technology to promote customerretention in mature marketsThese ndings are equally relevant for the twomature North American markets in the US andCanada. We believe that with high levels ofproduct penetration, in which many new sales

are simply business churning from one providerto another, the high costs of new customer

acquisition compared to lower product chargesmean that protability is increasingly drivenby retaining customers longer and increasingrevenue per existing customer: in other words,by increasing customer lifetime value.

Increase needs-based cross-selling effortsacross the AmericasIn our opinion, the data shows that it is essential

for insurers to increase their cross-selling effortsacross the region. To do this, insurers need toinvest in a new generation of predictive modelslinked to relationship management servicingtools that enable them to target existingcustomers with a propensity to buy appropriateproducts at the right price point. Rather thanfocus on hard-sell techniques, providers shouldemphasize needs-based sales techniques thatfocus on how a customers needs are changingand aim to offer an appropriate productaddressing those needs. Insurers that build long-term relationships with customers, giving them

what they want, when and how they want it, willdrive value.

Other

6%

It was easier to buy from a

provider I already know

44%

My agent advised me to buy

from this provider

19%

Dont know

2%

The product I already had was

outperforming the market

13%

I received a discount for

buying additional products

27%

I received other rewards for

buying additional products

from this provider

12%

I received additional services

without additional cost

25%

I trust the provider

48%


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018

Providers cant inuencepersistency

Received wisdom is that providers feel they have little ability to makea material difference to persistency. Our research shows that insurerscan improve customer retention by better meeting customerschanging needs.

Myth 5


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Providers do little to inuence persistency

There remains a common perception in theindustry that its hard to inuence persistency,particularly with largely intermediated sales inwhich insurers have limited contact with endcustomers. Our survey shows that, with theexception of Brazil, customers perception is that

providers make little effort to retain them whenthey are lapsing. Insurance providers on averageacross the region only make fair or great efforts toretain customers in 24% of cases.

However, the regional statistics obscure asignicant difference. Sixty-four percent ofproviders in Brazil do make an effort to retaincustomers. In Brazil, since most rst policies areoriginated through an employer relationship,Brazilian insurers have implemented processesto contact the customer upon termination ofemployment to ensure retention.

Customers leave because insurers are notresponding to their needsSwitching levels in life and investments policies mayat rst glance appear relatively low on averageacross the Americas only 9% of those surveyedhave changed their provider in the last ve years,compared with 8% in Europe and 10% in Asia-Pacic. For products with a 25-year life, however,this is a signicant degree of churn that cant beignored. Many customers (24%) change providers

because their needs have changed, indicating thatinsurers are missing a key opportunity to anticipateand address these changing needs throughproactive communications and exible offerings. Inaddition, there are regional variations: in Mexico,44% cite poor product performance as the reasonfor changing, and Brazilian (28%) customers

said they switched because their agent changedproviders.

Rewarding loyalty would make a differenceThe research also shows that customers are

increasingly used to having their loyalty rewardedin other industries, through either price discountsor extra value. As discussed on page 6, a numberof customers believe the insurance industry lagsbehind other industries in delivery of loyaltyreward programs.

At the point where customers leave, they clearlystate that if the provider had given them an

incentive to stay they would have considereddoing so. On average, 35% said that they wouldhave reconsidered the decision to switch if theirprovider had offered them better terms on theirexisting product.

Sadly, if a customer is about to leave, it may be toolate to repair the relationship. Building loyalty bymeeting customers needs and expectations overtheir lifetime will make a difference to persistency.

Insurers making a great or fair amount of effort to retain customers

Life and annuity

64%of providers in Brazilmake an effort toretain customers.

64%Brazil

28%Canada

24%Americas*

19%Mexico

12%US

* Total percentage for the overall region.


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Implications for insurersIncrease customer contactand responsivenessIt is clear that insurers need to improve thequality of contact with customers both during

their life cycle and particularly when they are atrisk of lapse. The survey provides evidence thatif carriers contact customers and are responsiveto their needs, offering greater productexibility and rewards for loyalty, then theywill retain more customers.

Invest in customer retention capabilities inmature and fast-growth marketsHaving an effective customer retention functionis becoming essential for insurers. If nothingelse it helps keep a low level of switching fromcreeping higher. Retention efforts should beintegrated with overall improvements how

providers engage with existing customers. Inaddition to offering increased exibility andnancial rewards for loyalty, providers shouldinvest in building customer insight so they canbe more proactive and anticipate customerschanging needs. Needs-based consultation atappropriate intervals is more effective thansales push.

In developing markets, we believe that insurersshould be planning for the future by buildingrobust customer analytics and sales and servicetools now. Providers in Latin America must also

be aware that their pace of market developmentmay far exceed the historical precedent of themature markets.

Improve management of intermediariesFinally, insurers can also inuence persistencythrough better management of intermediarychannels, whether directly tied to an insureror independent. Our observations suggestthat, some providers are segmentingdistributors based on a protability modelthat takes into account the persistencyof business introduced by intermediaries,enabling the providers to refocus their sales

management effort on more protableintermediaries and withdrawing businessfrom those who do not behave protably.

Newer capabilities, such as predictive modelsidentify the prole of customers likelyto consider switching, will also inuencepersistency. Granular data insights and tailoredrelationship management tools will separatewinners from also-rans.

Top ve reasons consumers switch providers in the Americas

Life and annuity

35%said that they wouldhave reconsidered

the decision toswitch if theirprovider had madethem a better offeron their existingproduct.


0% 10% 20% 30% 40% 50%

Brazil

Canada

Mexico

US

Americas*

Needs changed

Poor productperformance

Poor service Agent changed provider

Agent recommendeda change


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02Property and casualty

While there is some truth in the myths around how property and casualtyproducts are bought and sold, the reality is more complex. Understandingthe nuances helps insurers understand what they can do better or differentlyto attract consumers, deepen and retain relationships and unlock greatercustomer lifetime value.

Our survey explores the following myths:

1. The future is online

2. Its only about price

3. Good claims experience builds loyalty

4. Customers dont respond to cross-selling

5. Insurers cant inuence customer retention


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22

The future isonlineReceived wisdom is that the use of internet resources is growingrapidly and in the future online will be the dominant channel not

only for research, but also for transactions. Our research indicatesthat while online is an important part of the future, it is just onecomponent of an integrated channel management capability thatis critical to growth.

Across our survey, it is clear that online channelsare important for research and that the willcontinue to grow. The increasing reliance on theinternet is not conned to third-party websites,however. Some 23% of customers in the Americasare currently using a range of online channels,

including providers own websites and blogs, toresearch purchases. However, compared to use inother areas, the use of online channels is relativelylow across the region. In Europe 32% of consumersare already using online sources for research, andin Asia-Pacic the comparative percentage is 39%.

Across the Americas, our research shows that31% of consumers expect to make more use ofcomparison websites in the future a signicant

jump but one that still leaves the Americaslagging Europe. In this region, 37% of consumersexpect to make more use of comparison sites in the

future. In Asia-Pacic the percentage rises to 41%.Unsurprisingly, analysis of trends by demographicsegment and geography shows that use of onlinechannels is particularly prevalent among youngercustomers, growing in other age segments, andgrowing at a faster rate in Latin America than ineither the US or Canada.

Sales activity lags behind research activityThe Americas region also lags behind both Europeand Asia-Pacic when it comes to the actualpercentage of people who purchase insurancethrough online channels: 7% in the Americas versus

14% in both Europe and Asia-Pacic. There is alsoan interesting regional difference here. Consumersin Latin America are on average 20% more likelyto consider buying through an online site than aretheir counterparts in the US and Canada.

One possible reason the US and Canada lag behindthe rest of the region in the use of online channelsis that such channels are weaker and less maturein these areas than are direct channels, whichhave substantial resources and momentum behindthem. In Latin America, there is less industryinfrastructure, so all channels are starting from thesame point. The online space may be more popularhere than in the US and Canada because it offersthe most attractive combination of what consumerswant: brands that they trust and sources thatare both convenient and effective corporatewebsites, comparison sites, and social media such

as Facebook.

Personal contact is still essentialDirect personal contact, however, remainsimportant during virtually all critical phases of theproduct life cycle, particularly when customers areextending coverage, making a claim or dealing withother customer service issues. Customers clearlyvoiced a desire for both improved online access andcontinual personal contact when it matters. In ouropinion, a true multichannel approach to servicingthe customer is essential, not just today, but in theyears to come.

23%of customers inthe Americas arecurrently using a

range of onlinechannels, includingindependent blogsand providers ownwebsites.

Customers who want to make more use of websites

41%Asia-Pacific

37%Europe

31%Americas

Myth 1


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23

Property and casualty

31%of consumersexpect to makemore use of

comparisonwebsites inthe future.

Customers requiring all personal contact

When it comes to submitting a claim, personalcontact is by far the desired choice for companycommunication, with more than 50% of therespondents in the Americas wanting all personalcontact for the claim submission process. Everycountry except Brazil showed similar results. Inthe US, more people are willing to renew their

policies without all personal contact with only38% of consumers require all personal contact.This trend is likely to be driven by the technologyinvestment many insurance companies have madein the renewal process. In Mexico, personal contactis even more important than in other countries inthis region.


Meet customer expectations across channelsThe online world is here today, but it is still inits infancy. If experience from across the globeis any indicator, aggregators and competitivewebsites will gain in prominence. Social mediamight begin to serve as a proxy for friendsand family. Multichannel, coordinated dataintegration will be essential, and consumer

desires must dictate its form and timing.

Providers need a multichannel strategythat meets customer expectations bycombining clear product information for newbuyers and a simplied renewal process forreturning customers. This needs to take intoaccount the mix of customer types and theirdiffering information needs. Online take-up,understandably, is slower for more complexproducts. Making the process easy andreliable is therefore the most importanttactic for companies.

Adapt the sales process to the onlineenvironmentIn our experience, many insurers have madegreat progress in ensuring their sales process is

adapted to the online environment. Customersexpect insurers to integrate different methods ofcommunication; they want to be able to choosethe communication method that suits them atthe time and for a particular purpose, and toswitch between channels without repeating partof a transaction.

Integrate communication channelsInsurers have to be able to seamlesslyintegrate online and ofine channels to meetchanging customer needs over the productlife cycle. Ensuring accurate and easy-to-userecord-keeping across three or four differentcommunication methods is a technologicalchallenge for many organizations. Certainly,when consumers decide they want personalinteraction, whether face-to-face, by telephoneor through web chat, they want their time to betreated as valuable and not squandered on aninsurers own process inefciencies or internal

requirements. Customer expectations of thesales process are high, and a contact center(phone and internet) will still be needed tosupport queries.

0% 10% 20% 30% 40% 50% 60% 70%

Brazil

Canada

Mexico

US

Americas*

Renewing

Extending cover

Making a claim

Other questions



26/40

Its only aboutpriceReceived wisdom is that property and casualty products are oftencommoditized, and price, therefore, is the only criterion on which

they are purchased. Our research indicates that other value factors,such as brand and product features, are surprisingly critical.

Myth 2


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Price is an important component of value but it isnot the only one. Pricing is particularly sensitivefor new business. At renewal, in making their valuedecision, customers will also consider the servicethey have received and the condence they havein the provider. The degree of switching, however,is also inuenced by country culture and market

structure. For example, in the mature marketsof the US and Canada, where many providerscompete for business, switching is more commonthan in less mature markets.

In some ways, property and casualty productsare very different from commodity goods, whichare characterized by standardized quality and asingle price. In contrast, although price comparisonwebsites are starting to drive price convergencein certain segments, particularly in Latin America,property and casualty customers seek todifferentiate providers on other components ofvalue, such as brand trustworthiness, previous

experience and attractive product features.

A number of drivers affect purchasing behaviorOur research shows that across the Americas, pricewas the key driver in purchasing decisions for 58%of people, followed by well-known or trustworthybrand (42%), holding another product from the

same insurer (31%), track record or reputation(29%), good customer service (34%) and nancialstrength and stability (25%). The only marketsignicantly at odds with this picture was that ofBrazil, where consumers rated brand strength on apar with price.

Non-price factors are also critical in deepeningcustomer loyalty. Those customers who remainedloyal said that service and trust were their mainreasons for not switching, with competitive pricingranked in third place.

Younger consumers will pay a premium for brandIn property and casualty, unlike life and annuities,consumers indicated that they would be willing topay a premium for certain attributes.

In the US, an interesting demographic quirk alsorevealed that a relatively high proportion (43%)of consumers ages 18-34 are more willing to pay

for a nancially stable brand, whereas only 33% ofconsumers in the 35-54 age bracket shared thatpreference. Clearly the data shows that effectiveunderwriting and pricing starts with marketingand sales by product, demographic and otherkey attributes.


58%of respondents citedprice as the keydriver in purchasingdecisions.

Key factors affecting choice of insurer

0% 10% 20% 30% 40% 50% 60% 70% 80%

Brazil

Canada

Mexico

US

Americas*

Price

Brand

Existing product Reputation

Customer service



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26

Key reasons for not changing insurance provider in the Americas


Happy with service I trust my provider

Easier to stay Confident they will pay on a claim

Price competitive

45% 37%

28% 22%

32%

43%of consumersaged 1834 aremore willing to payfor a nanciallystable brand.


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Build your brand and provide world-classcustomer serviceWhile being competitive on price remains critical(at least for the desired risk segments), there

are additional factors that insurers can addressto increase customer retention and win newcustomers. These include product exibility,brand positioning, customer segmentationand ease and simplicity of the sales andrenewal processes.

Increase pricing sophisticationSomewhat ironically, the fact that non-pricefactors are nearly as important as price meansthat companies must increase their pricingsophistication in order to compete successfullyin this market. The wide variety of customersegments within the group means that insurers

need to understand buyer values and true costto serve by demographic group and build thisinformation into their pricing models. This islikely to prove more of a challenge for smallerplayers that are trying to compete with thelarger carriers, but lack both the resources toinvest in this kind of analysis and the volume ofdata needed to make it viable.

Customers vulnerability to other insurersbrands or products must also be included inpricing models that aim to determine how mucha provider can charge and still win the business.

For example, how much is the consumer willingto pay for the stronger of two brands?

Build customer insight into brand positioningInsurers need to decide how to position theirbrand whether to have a multibrand strategytargeting different customer segments, aubiquitous brand with general appeal, orsomething in between. Whichever optionproviders and intermediaries choose, they willneed to invest in customer insight techniquesand technology, and then build this insightinto their customer operational processes andproduct design to ensure they are agile enough

to appeal to a wide set of customer behaviors.

Manage your brand onlineInsurers also have to invest in managing theirbrand online to ensure that blogged and tweetedcomments reect their brand values. Managingtheir reputation in cyberspace is not somethinginsurers have had to do in the past.

28%

29%

43%

1834

32%

35%

33%

3554

33%

32%

35%

55+

Are you willing to pay a premium for a product if it comesfrom a strong or nancially stable brand? Yes No Dont know


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In our research a very clear and consistent pictureemerged around claims. Excellent claims serviceis expected and will not, in itself, drive loyaltyor customer retention. Customers expect greatservice as a matter of course and the fact that theyhave received it will not stop them from shopping

around. Conversely, a poor claims service is likelyto drive customers to switch providers.

In our research, 51% of consumers in the Americaswho felt they had received poor claims service saidthey were unlikely to switch providers comparedto 67% of those who never led a claim and 66% ofthose who had received a good claims experience.This pattern was similar in many of the regionswe surveyed.

When asked what their insurer could havedone to improve the handling of their claim,the overwhelming response was that insurerscould have acted with more speed (33%) andcommunicated better (32%).

Substantial opportunity to improve claimsin Brazil

Regional gures conceal a considerable differencein satisfaction with the claims experience betweenBrazil and the other countries in the region. In theUS, 71% of consumers said they were satised,followed closely by consumers in Mexico (68%) andCanada (66%), but in Brazil only 31% were satised.

Good claims experiencebuildsloyalty

Received wisdom is that if providers offer a good claims experience,customers will be delighted and this will drive loyalty and help buildbrand value. Our research shows that a good claims experience isnow expected, and that a bad experience diminishes brand value.

Measures insurers can take to improve the Americas claims experience

51%of consumersin the Americaswho felt they hadreceived poorclaims service saidthey were unlikely

to switch providers.

Were flexible because it wasa minor or first claim onthis policy

9%

Provided a better level ofcommunication with meduring the claims process

32%

Provided more or betterquality options for repairor replacement

22%

Other

5%

Provided better practicalsupport following the incident

21%

Nothing

27%

Used better qualitycompanies/people for therepair or replacement

12%

Provided a morepersonal service

23%

Dealt with my claimmore quickly

33%

Myth 3


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The key message from the customer perspectiveis that a good claims experience is a necessaryfactor driving renewal but is not the only factor.From the providers perspective, getting the

claims process right will help companies manageclaims spend rather than drive improvedretention.

Inefcient claims processes are one source ofnancial leakage for insurers across the region.Improving claims efciency and effectivenesscan therefore have a signicant impact on aninsurers bottom line.

Maintain claims service investment acrossthe regionIn the North American markets, claimsservice has a predominantly downside risk.

As customer expectations change, it is criticalthat insurers invest to keep up and to ensurethat communication methods and distributionchannels integrate seamlessly, otherwise thelevel of service that would have scored 8/10today, might only score 6/10 in three yearstime truly damaging company retention.However, in Brazil and Mexico, improving theclaims experience could be a source of

competitive advantage for new entrantsas standards are not meeting customerexpectations as of today.

Differentiate service based oncustomer needsTo meet customer expectations, insurers needa deep understanding of the varying needsof individual customer groupings. While oldercustomers tend to value personal contactduring the claims process, younger consumersare more concerned with speed of settlement.Consumers across all age groupings may rely ona variety of communications channels phonecalls, email or texts to keep them informed as aclaim progresses.

Maintain consistent communication across

channels and touchpointsTo meet customers expectations, companiesmust be agile enough to respond promptlyand appropriately and maintain transparencyand consistency, across multiple channels andtouch points. Investment in claims processesand technology should not be driven by thebelief that it will help to improve retention, butby the desire to improve efciency for both thecustomer and the insurer.

Claims satisfaction varies across the Americas

68%of consumersin Mexico weresatised, while inBrazil fewer thanone-third (31%)stated that theywere satised.

29


71%US

66%

Canada

66%Americas*

68%Mexico

31%

Brazil



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Customersdontrespond to cross-selling

Received wisdom is that customers dont enjoy the sales process andresent insurers trying to sell them additional products. Our researchnds that insurers who understand their customers needs and offerthe right propositions can cross-sell, up-sell and repeat-sell effectively.

Myth 4


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31

Our research shows that while present levels ofcross-selling are relatively low, customers arewilling to buy multiple products from their existingproduct providers. In fact, many prefer to do so if itis convenient for them and delivers greater value.Across the region, 52% of consumers stated theypreferred to buy multiple products from the same

provider, with the lowest level of agreement inCanada (49%) and the highest in Mexico (62%).

Across the Americas, convenience (simplicity) andvalue (cheaper) are the most often cited drivers forrepeat purchasing, with service also featuring inthe responses from Brazil and Mexico.

Although customers are willing to buy more,they expect insurers to make it easy for them

and to share in the benet. The process has tobe convenient for example, an opportunityfor cross-selling must be provided at the timeof original purchase and via the channel of thecustomers choosing.


Close the opportunity gapWhatever channels carriers offer, there issignicant competitive advantage to be had in

making a step change in the ability to cross-sellas there is an opportunity gap here betweenwhat customers want and todays cross-sellingreality. Insurers need to ask how they candemonstrate that another purchase from thesame provider is either easier or a better valuethan going to another insurer.

As the amount and quality of third-party,publicly available data grows, so too doesthe potential for carriers to service theircustomers better and cross-sell their products.Consumers want and expect innovation and

resourcefulness.

Leverage data insights to align products tocustomer needsWe believe direct sales channels should seekto leverage their improved customer datato provide a range of products aligned tothe customers needs. Independent agents(particularly multi-tied) are also in a very goodposition to provide a range of products and price

comparison points. Online channels will need tooffer easy-to-understand, unbundled productswith clear up-sell options enabling customers to

build into the product the value that meets theirneeds. In the online environment, the strategywill involve more up-selling than cross-selling.

Across every channel, to make purchasing easyand convenient, sales processes for repeatsales should leverage the insurers existingdata to shorten the sale time and help tailor theproduct. Insurers who ask questions to whichthey already know (or should know) the answerwill lose their goodwill advantage very quickly.

Reward customer loyalty

In addition, customers in many countrieswill expect a discount for holding more thanone product, so insurers need to develop apricing model that allows this. For example,they might share some of the benets from animprovement in the assumptions on retentionfor those customers with multiple products.

Key reasons for buying multiple products from the same provider


52%of consumers statedthey preferredto buy multipleproducts from thesame provider.

I think I will get a betterservice from one provider

36%

Dont know

2%

Other

2%

It was cheaper to havemultiple products withone insurer

51%

It just makes it simpler tohave it all in one place

65%

My agent/advisorsuggested that I do it

5%


34/40

Insurers cant inuencecustomer retention

Received wisdom is that providers feel they have little ability to retaincustomers its just not something they can control. Our research ndsthat insurers can inuence retention by showing their customers thatthey value their loyalty.

Myth 5


35/40


36/40

34



Lock down retention from the outsetCustomer inertia favors providers, but it is clearthat there is more to gain in some countriesfrom improving retention activity. If the UK is

any indication, insurers should move fast to lockdown retention while they still can.

Understand cost to serve and targetretention efforts accordinglyWhile retaining their best customers is the goal,unless insurers understand the cost to serve ofdifferent customer segments and channels, theycannot develop the predictive models that willenable them to determine whether a customeris worth retaining and, therefore, how muchthey should invest in retaining the customer.Companies also need to better understand theswitching behavior of their clients and how it

differs by territory and customer segment.Combining an understanding of cost to servewith switching propensity will inform an insurersretention strategy.

Having an effective customer retention functionthat segments the customer base, targets thosewho are most valuable (and likely to switch)and communicates with them proactively isbecoming increasingly important for insurers toboost retention and protability.

Build retention strategies around anexperienced team and exible products

For some insurers, the best retention strategywill be a sophisticated approach using a highly

trained specialist retention sales force able tomake appropriate recommendations aroundproduct and pricing combinations. This requiresnot only a dedicated staff, but also agileproducts with exible pricing models so that theretention team is able to negotiate effectively onprice and product coverage to meet customersneeds. Without this level of product exibility,the retention team ends up only being able tooffer blanket discounts, which rarely createlong-term protability.

Invest in models and rewardsTools such as predictive models that determine

which customers are likely to leave but dontwant to do so, will be essential to better harvestCRM (Customer Relationship Management)benets and drive improved retention. Also,loyalty and rewards programs are sorely lackingat many carriers today loyalty innovationbased on customer demographics is essential tokeep pace in an evolving landscape.

Retention effort compared with renewal potential across regions

83%of Canadian

consumersreported theyhad received littleor no contact

prior to renewal.

Mexico

Brazil

Americas

Canada

US

0% 20% 40% 60% 80% 100%

Asia-Pacific

Europe

Regional average

Country average

More likely to renewif contacted

Little to no effort bycurrent provider


37/40

During August and October 2011, Ernst & Young commissioned a global customer insurance survey.Working with Ipsos, this research focused on better understanding the behaviors and expectations ofcustomers across the globe.

The survey covered 24,000 customers across 7 regions and 23 countries.

The survey was designed to be broadly representative of the insurance-buying population in each

country, accessible through online panels. Only people holding at least one insurance policy were eligibleto participate. This methodology has been widely used by Ipsos for insurance, consumer products andservices clients around the world.

It is important to remember that in developing markets, online panels tend to be more representativeof an urban and relatively afuent population than of the population as a whole. However, as this is thegroup that is more likely to buy insurance (and indeed, consumer goods and services in general), it wasfelt that an online approach still produced a sample that is broadly representative of the target marketfor insurance companies. It is also a reasonable assumption that younger people are less likely to own aninsurance policy and therefore formed a smaller proportion of responses to the survey than they do of thepopulation as a whole.

The following steps were taken to reach a cross-section of insurance customers via theonline panels:

Interviews were conducted in each market using online access panels* among members of theadult population.**

The outgoing sample, i.e., the group of people initially invited to respond to the survey, was balanced tobe representative of the national population by age, gender and region.

A screening question was placed at the beginning of the survey to exclude respondents who did nothold at least one product from a set list of insurance products.

Quotas were set on life and pensions and non-life insurance to ensure equal numbers of responsesacross the two main insurance categories (in order to facilitate analysis within each category).

No further quotas were set. The interviews were left to fall out naturally across the online demographicgroups on the assumption that the responses should broadly reect the prole of the insurance marketin each country.

For the European, American, Asia-Pacic and India regions, the data has been weighted accordingto the size of each individual countrys Gross National Income adjusted for the Purchase Parity Power(GNI PPP). Source: World Bank website, 2010 data.

Analysis of the survey ndings has been conducted jointly by Ipsos and Ernst & Young.

Life and pensions

Age

Gender

Non-life insurance

Age

Gender

18-24

25-34

35-44

45-54

55-64

65+

13%

17%

21%

24%

13%

12%

18-24

25-34

35-44

45-54

55-64

65+

13%

18%

22%

23%

11%13%

Male

51%Female49%

Male

49%Female51%

* South Africa conducted ofine and India mixed online/ofine.** In some markets this is 18-65 years old, extended to 65+ where feasible.

Excludes regions in some developing markets where this is not appropriate.

Global methodology

35


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BrazilRodrigo Silva DantasPartner, Advisory Financial ServicesErnst & Young TercoEmail: [email protected] Tel: +55 11 2573 3588

Grgory GobettiPartner, Advisory Financial ServicesErnst & Young TercoEmail: [email protected] Tel: +55 11 2573 3262

Canada

Kathy LissonCanadian Insurance Advisory Services PartnerErnst & Young LLPEmail: [email protected] Tel: +416 943 3969

Doug McPhieCanadian Insurance LeaderErnst & Young LLPEmail: [email protected] Tel: +416 943 3800

MexicoJos Manuel Mndez

Partner, Financial Services

Mancera, S.C. member of Ernst & Young GlobalEmail:[email protected] Tel: +55 5283 1455

Hernan NaviaMarkets Leader, Financial ServicesErnst & Young LLPEmail: [email protected] Tel: +1 305 415 1691

United StatesHeidi BoylePrincipal, Financial ServicesErnst & Young LLPEmail: [email protected] Tel: +1 605 254 3394

David P. HollanderGlobal Insurance Advisory LeaderErnst & YoungEmail: [email protected] Tel: +1 215 448 5756

Find out how we can help at www.ey.com/insurance, or contact a member of our team.

Ernst & Young is a global leader in professional services andhas signicant experience providing a broad range of servicesto the insurance industry. Our reputation is built on assemblingmultidisciplinary insurance teams from around the world to delivera range of services, including: performance improvement; nancial

management and control; change management; regulatoryreporting; risk management; information technology; productdesign; tax; transactions; actuarial; corporate advisory; and auditservices. This means you get a clear perspective of your marketand the options available to you. Its how Ernst & Young makesa difference.

How Ernst & Young can help
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About Ernst & Young

Ernst & Young is a global leader in assurance, tax,

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2012 EYGM Limited.All Rights Reserved.

EYG No. EG0078c

In line with Ernst & Youngs commitment to minimize

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This publication contains information in summary form and is

therefore intended for general guidance only. It is not intended to

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judgment. Neither EYGM Limited nor any other member of the global

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20130204 Global Consumer Insurance Survey 2012 America

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