- 1 Introduction
- 2 Keep it simple and understandable
- 3 Target specific segments with new products and services
- 4 Roll out parametric home insurance
- 5 Country-specific results
- 6 Conclusion
- 7 Appendix
Which features and characteristics of home and motor policy are most attractive to customers ? This question has been foremost in the minds of insurance executives in holocene years. The answers are gaining in importunity as the ongoing social and economic consequences of COVID-19 are leading many customers to consider the value and flexibility of policy products in terms of changing circumstances and needs .
To explore the need for different types of merchandise and avail, Deloitte surveyed over 8,000 customers from Australia, Canada, China, Germany, Italy, Japan, the United Kingdom and United States. The results give a authorize indication of what customers want. Insurers can use this feedback to help guide the establish of newfangled products, services and partnerships with InsurTechs .
Five chief findings emerge from the survey :
- customers favour simplicity; they want products that are easy to understand, purchase and use, they also want to be confident that they are paying a fair price, and to trust that claims will be paid fairly; with this insight, insurers can use a human-centred approach to redesign products and exceed customers’ expectations
- interest in insurance embedded into other services and in new product designs is strong in some customer segments, but varies considerably by country
- Internet-connected offerings, such as motor telematics and home insurance linked to home sensors, cause apprehension among many customers; they do not feel comfortable sharing data from car and home sensors with insurers
- the COVID-19 pandemic is increasing demand for adjustable cover and pushing people towards transacting via online channels; this behaviour is unlikely to revert to pre-crisis norms for many people
- the survey suggests three opportunities to fuel growth: simplify how customers perceive and interact with products; tap into strong demand for parametric home insurance; and target carefully delineated segments with new services.
Keep it simple and understandable
Our chief witness is that customers favour ease. design 1 shows customers ’ keystone reasons for liking or disliking a image of products and services ( see the Appendix for broad descriptions ). The most democratic products are those that are easy to compare, familiar, simple and nonintrusive. Customers, therefore, like the chasteness offered by ‘ basic ’ products, but besides express some frustration with their miss of flexibility .
What is behind these results?
Simplicity – Many respondents like bare products because they are agile and easy to understand, purchase and use. At the same time, simple products engender confidence concerning what is covered, an topic that has risen in prominence due to COVID-19. Many of those surveyed queried how their policies would respond to changes brought about by lockdown. 1 One customer summed up this sentiment by saying that he preferred the basic merchandise because, “ It ’ s a arrange and forget. ” Others said that they liked basic cover charge the most because it is “ easy to understand ” and “ easy to deal with. ”
Data privacy – Customers are increasingly concerned about data privacy and do not like to share personal data with insurers without a compelling reason. For exercise, only 54 per penny would voluntarily share their credit history with an insurance company in return for a lower premium and coverage more tailor to their needs. many seek to avoid sharing data that might trigger a arise in their premiums ; others do not like the feel of privacy invasion. 2 One respondent said : “ I think it is easier to keep these necessity services [ such as centrifugal indemnity ] reasonably equal to all groups in society by not requiring [ extra ] information. ”
Comparability – Many younger customers, peculiarly in China and the UK, compare insurers to find and switch to the cheap policy each year. Across the eight countries surveyed, a quarter of motive policy customers and a fifth of base insurance customers report having switched in the past 12 months. In China and the UK, this rises to 48 per penny and 44 per cent among the 18-34s for home indemnity and 57 per cent and 53 per cent among the like senesce group in motor insurance .
Customers rated ‘ self-controlled and adjustable ’ cover as their second darling. It captured a 19 per penny contribution of products ranked as customers ’ number one choice .
Adjustability – Feedback to the survey shows that many respondents want the ability to adjust their cover based on what they need and can afford. The feedback besides revealed that adjustability has risen in importance in the minds of customers ascribable to the disturbance to animation and work caused by COVID-19. however, insurers need to walk a fine line between keeping products simple for the customer and allowing adjustability. Customers are improbable to log into their policy company ’ south web site every week, nor could they be expected to understand hundreds of variables by which they could adjust their overlay .
many people have been working from home due to the outbreak. One respondent said she liked the concept more than others because : “ If you are working from home all the meter your ( home ) policy should be cheaper, besides there is huge disparity in the sum of valuables that unlike people keep in their homes so it makes smell that the insurance cost should vary. ” Another said that he liked this type of cover charge the most because : “ Work and employment is always fluctuate, which is affecting the things I can afford. ”
In accession, across the eight surveyed countries, approximately three-quarters said that they have driven less due to the outbreak. One customer summed up her reason for liking adjustable motor insurance by saying that it “ is great as I am not driving a bunch due to the coronavirus [ and I ] would like to keep my policy cost down. ”
At the other end of the spectrum, customers are least in privilege of internet ‘ connected and cost-focused ’ home insurance, and connected centrifugal insurance providing a broad service. These services see the agio partially based on personal data, such as home energy consumption or where the policyholder drives, which gives the policyholder telescope to influence his or her insurance cost. The insurance company besides provides the policyholder with services based on the shared data, such as information on how to reduce home running costs or enhance cable car service. Despite the advanced nature of these services, many respondents are concerned about an invasion of privacy and, related to this, paying more than with a basic policy. indeed, some questioned the motivation for connected services at all .
How to read these results forward?
Products designed, marketed and delivered based on customer preferences for chasteness, data privacy and adjustability will succeed based on the responses gathered. Insurers can use the cognition of these preferences to enhance their products. Examples include :
- use a human-centred approach to redesign insurance products to be simple so that they exceed customers’ expectations
- make the direct online experience of buying and adjusting insurance policies also simple – keep the language understandable and, when giving options, don’t make it complicated while explaining the differences between the options
- automatically pre-populate forms so that the data entry required of customers is minimised
- shorten and simplify policy documents (and provide them via an app or website in a way that makes retrieving and interrogating them quick and easy)
- make pricing simpler and more transparent, for example, by charging a fixed fee plus an amount for usage such as miles driven.
Case study: simple customer experience3
Lemonade, a full-stack InsurTech selling insurance to homeowners and renters in the US, has a relatively simple customer experience. To quote, the customer enters his or her personal information via a web site. Data entry is minimised. The interface is intuitive. This is chiefly because instructions are easy to read and understand, and because the content on each filmdom is minimal. To claim, the customer uses an application. Lemonade states that 30 per cent of claims are handled instantaneously. This is achieved by automating the treatment of low value claims using artificial intelligence. The policy document, which runs to 16 sparsely populated pages, is written in simple terminology. In addition, Lemonade has attempted to simplify its charging social organization with a fix percentage of premiums. Surplus funds after claims are given to charity preferably than taken as profit .
- do not make customers share more data than necessary
- extract data from open and proprietary sources to minimise data provided by customers
- explain to customers that by providing more data they can bring their insurance cost down.
- give customers easy-to-use digital access to adjust their cover, help them identify what level of cover is required, for example, by enabling them to upload pictures to estimate the value of buildings, household items or vehicles
- provide online self-service channels for simple needs and a broad range of self-service channels for the internet-savvy
- build in checks to alert customers to under-insurance, over-insurance or protection gaps. At scale, the benefits of engendering additional trust among many customers will outweigh the cost in forgone premiums of some customers, reducing over-insurance.
Case study: flexible and simple car insurance4
In 2020, IAG, Australia ’ randomness largest general insurance company, launched a car policy product designed to be easier, but besides more flexible than a traditional product. Charging is via a monthly subscription with no cancellation fees, making it easier and cheaper to switch than with a typical annual contract. Customers can add multiple cars and drivers to a unmarried policy using on-line self-service, which is built to have an intuitive and simple drug user experience .
Target specific segments with new products and services
The view indicates that younger customers are more in favor of newfangled concepts than elder ones. More importantly, the survey points to the being of segments where people are most probable to buy a new merchandise or overhaul quite than a basic policy. We identified three segments .
Gadget group – Survey respondents aged 18 to 34 with $ 50k to $ 100k+ annual income who have purchased a sign of the zodiac in the past three years. The appliance group is more probably to purchase a ‘ connected and contraceptive ’ home indemnity serve than any other type of policy ( figure 2 ) .
review respondents like connected and preventive home indemnity because it could be safer and quicker to deal with risks than with a basic policy. One said : “ Being warned or informed in the form of notifications when met with a hard crisis, like leaking pipes … is such a boon. It prompts you to take immediate action to fix it. ”
The appliance group ’ s chief reason for liking connected and preventive home indemnity is its potential to lessen physical damage. beyond this, what other electric potential attributes of this overhaul should insurers consider ?
requirement for proactive in-home protection of the aged will increase. Society is ageing, both in advance economies and in certain major emerging ones such as China. besides, the COVID-19 pandemic has highlighted the vulnerability of aged people, particularly when forced to shelter at home. Insurers can get ahead of this course by using internet-connected technology to help those customers who are exquisite to enhance manage for the aged through monitor .
In accession, a report on home energy use could be part of a connected and hindrance home indemnity and aid people to reduce carbon paper emissions. One respondent said : “ Finding ways to reduce cost in the house is always a good thing and hopefully it can besides help to reduce our carbon footprint. ” The objective of reducing carbon emissions at home will only rise in importance. Climate change is becoming a social challenge no one can ignore .
Case study: connected and preventative home insurance5
Neos, a UK InsurTech that is majority-owned by Aviva with Munich Re as a strategic collaborator, provides family policy along with a box of internet-connected devices that reduce gamble in the home. The software includes a camera, leak sensors and smoke detectors. Customers can monitor their homes and meet alerts via an app. In 2019, Neos signed 174,000 users, and its technology became a phone number one best seller on Amazon .
Targeting this segment with connected and hindrance home insurance services has three significant upsides. First, the segment has the potential to be highly profitable. This is because losses would be lower than without home sensors. however, the savings on claims would need to be netted against the monetary value of installing and running home sensors. Ways to minimise the engineering price include targeting people who already have sensors and by partnering with manufacturers to provide subsidized sensors. Second, it is a means to build a valuable extra source of risk-relevant data. finally, it can help insurers prepare for the future. The concept of internet-connected and preventive home indemnity will become more mainstream as home sensors are being embedded in newly constructed homes .
Risk-averse renters – The surveil besides contains tell of a distinct renters section. Those who are aged between 18 and 34 and who rent are most likely to buy self-controlled and adjustable home indemnity ( calculate 3 ). This group is termed risk-averse renters .
People in the segment are particularly interest in self-controlled and adjustable cover because many have high-value items but lower incomes than elder peers. One person explained that she liked the concept more than others because “ I have to worry about cost, and I am a renter. ” Another said : “ I love the flexibility in this service, and being able to adjust my indemnity based on what I can afford or need is a large summation for me. ”
Case study: renters insurance that gives the customer control6
Jetty, a New York City-based InsurTech, aims to give customers more manipulate over the sources of stress and friction in renting. It enables renters to swap their security down payment with a smaller, erstwhile tip of just 17.5 per cent of the deposit come. Jetty besides provides renters policy and a deposit guarantee service. Cover is designed to be elementary so far adjustable. Customers can tailor their cover around high-value items, such as electronics and art .
The survey reiterates the point that in some major economies, renter ’ second policy is a market with considerable room to grow, as penetration is low. Across Australia, China, Italy and the UK, only 14 to 28 per cent of respondents have this cover. This gap may grow. Renting was on the increase before the COVID-19 pandemic, and this vogue will likely accelerate due to the current economic downturn. 7
Convenience crew – A segment who lease their cars and live in the UK is most likely to buy ‘ inconspicuous ’ motive insurance ( figure 4 ) .
invisible motor indemnity avail sees cover provided as part of the car purchase or lease agreement. The policyholder does not need to arrange indemnity. Repairs are handled by the cable car manufacturer through a local car dealer. It is more commodious than arranging and managing a basic policy because the customer has much less to do .
One person stated that she opted for this type of service because : “ This option seems very practical and commodious for customers, which is great in a fast-paced club where people tend to choose policy and early such necessities based on their benefits and levels of customer convenience. ”
Case study: purchase-embedded car insurance8
From December 2019, all new MINIs sold in the UK came with three months ’ complimentary centrifugal policy. After the three-month period, drivers are mechanically covered via a monthly subscription. The product is available from MINI retailers at the bespeak of sale. BMW Group Financial Services, the insurance company, hopes that the product will provide customers with public toilet and a positive experience. In addition, it gives the insurance company an opportunity to understand better what their customers in truth want so they can improve their customer relationships and build on trade name loyalty .
Roll out parametric home insurance
The view highlights strong demand for parametric character family insurance products. This type of indemnity pays claims of a pre-agreed amount automatically when an consequence falls within adjust parameters, such as a level of rain or accelerate of wind instrument. Three-fifths of home indemnity customers rated it highly or identical desirable, making it the most popular feature ( figure 5 ) .
For Australia, which was struck by large-scale bushfires from November 2019 to January 2020, the figure is 65 per cent. More broadly, the increasing toll of natural disasters, combined with the COVID-19 pandemic, is heightening the awareness of society ’ second exposure to risk among customers .
Parametric home insurance besides aligns with customers ’ desire for chasteness and builds confidence that claims will be paid. This is because the claim measure and payment trigger are pre-agreed. More than half of respondents typically conduct inquiry into what it is like to make a claim with an insurance company before buying a product. The most research issue is whether the insurance company pays claims fairly. parametric indemnity can besides close protection gaps, for exemplar, in US home indemnity, by specifically covering excluded perils such as flooding caused by a storm. besides, it can be quicker and cheaper because it is automated with no loss-adjusting procedure .
Insurers can respond to this requirement by continuing to roll out parametric home indemnity, focusing on bad areas where the motivation is most pressing .
Case study: parametric earthquake insurance9
JumpStart provides parametric policy against earthquake gamble in California. The gun trigger for claims is measured against the saturation of crunch shake. price is based on a probabilistic model using geological surveys. The product aims to be crystalline and elementary with a seamless customer know. Underwriting criteria require merely a minimum total of data, mean that the process is quick ; Jumpstart needs only a valid address for underwrite. Payment is intended to cover a helping of expenses caused by break following an earthquake, including, but not restrict to, property damage. JumpStart is aiming to fill the earthquake security gap : only 10 per penny of californian residents have earthquake cover. 10
How do the results vary by state ? What can insurers learn by comparing and contrasting the country-level results ?
basic cover is the most popular intersection in all countries except China .
In China, connected and hindrance base indemnity is the favored ( figure 6 ) .
This resultant role is influenced by a combination of factors specific to China. There are many first-time homebuyers in the country. Added to this, the penetration of home policy is low : only 31 per penny of homeowners have a policy according to the sketch. As a consequence, many are unfamiliar with basic home indemnity products and consequently feel no urge to ‘ go with what they know ’. Furthermore, many are comfortable sharing data with insurers because sharing personal data ( for exercise, banking data ) with politics departments and companies is far-flung and accepted. 11
This opinion stands in blunt contrast with that of customers in other survey countries. We tested customers ’ willingness to parcel eleven unlike types of data with insurers, ranging from policy history to social media history, to receive a lower bounty or breed that better matches their needs. On average across the football team types of datum, about three-fifths ( 57 per penny ) of taiwanese customers would share their data, but alone a one-third ( 34 per penny ) of german customers would do so ( visualize 7 ) .
This detect reinforces the steer that insurers need to factor in local conditions when building products and services reliant on customers sharing personal data. For case, while german customers are generally less in favor of sharing data with their insurers than customers in other surveil countries, this does not apply to home energy custom data. This likely reflects the increase in the cost of energy in Germany following the phasing out of nuclear world power, which began in 2011 .
In China, self-controlled and adjustable brood is the most democratic type of drive indemnity ( digit 8 ). As per home indemnity, this solution reflects that many Chinese are unfamiliar with basic motive policy products .
It besides reflects the chinese have of COVID-19. Certain parts of China were hit hard by the virus and endured hard-and-fast lockdowns, which altered established patterns of live and ferment. According to the review, more than a one-third in China ( 37 per cent ) have used their car for work since the COVID-19 outbreak, compared with only a one-tenth in the other countries. Driving for solve requires occupation vehicle indemnity. Self-controlled and adjustable drive insurance could be switched from personal to clientele use as the need arises, which would be cheaper than using a business policy for all drive .
For italian customers selecting centrifugal indemnity, self-controlled and adjustable cover captured about as many total one ranks ( 20 per penny ) as basic cover ( 22 per cent ) whereas in other countries, with the exception of China, basic cover was the net front-runner .
We see this solution as influenced by the advance of centrifugal telematics in the country. Motor telematics has a relatively high penetration in Italy ( 16 per penny in 2018 compared with only 2 per cent across Europe ). 12 One argue is that telematics can help with vehicle convalescence, an publish of particular importance due to the relatively eminent incidence of fomite larceny. The progress of telematics in Italy has caused italian customers to be more unfold to new insurance products and services than counterparts in other mature markets .
The relevance for insurers is double. For modern products and services based on customers sharing their data to succeed, the value customers receive in exchange must be compelling ; discounts and cut coverage alone may be insufficient. More positively, the progress of one merchandise can spur customer matter to in new types of product and service on a big scale. We believe that this will happen with connect home insurance ( see above ) .
UK customers are the most powerfully in favor of basic blanket, in both home and motor indemnity, which is influenced by the common practice of comparing basic policies on price comparison websites. In the UK, increasing price rival accompanied the rise of on-line channels for purchasing policy in general, and monetary value comparison websites in particular. 13 This drift ultimately led to a dangerous industry-wide corrosion of cover profit margins .
Across most of the eight surveyed countries, fewer than half use on-line channels to purchase motive indemnity ( figure 9 ). For home policy, the on-line shares are lower still .
however, on-line buying will surely spread. Younger customers are more in favor of on-line buy than older customers. For case, in the US, 63 per penny of the 18 to 34 age group prefer to buy car insurance via on-line channels compared with 35 per cent of those aged 55 or more. COVID-19 will credibly further this transition as on-line becomes a favored way to make purchases where potential .
The key item is that product reduction needs to be accompanied by measures that ensure customers remain patriotic. These include improvements to convenience, value and servicing. This is particularly relevant given the increased swerve to buy products and services via on-line channels, which make it easier to switch insurance company than with offline channels .
Insurers need to simplify how customers perceive and interact with basic products and demonstrate their value clearly. They besides need to respond to the segments where people want something different, which are most prevailing among millennials. Serving these groups represents a largely untapped opportunity to grow productively, but besides, more importantly, a probability to get ahead of the curve. Today ’ mho segment is tomorrow ’ randomness mainstream .
Basic home insurance
The customer ’ second home is in full protected. The customer purchases insurance normally, for example, via a web site or agent. The monetary value of the indemnity is based on the value, characteristics and location of the customer ’ mho home, and on his or her past indemnity history .
Home concierge insurance
The customer receives a service box that gives access to 24/7 base accompaniment. The package includes the standard sic of protections from a home policy policy, but besides provides hold to manage losses from the home or damage to it. The customer gets access to a repairperson .
Connected and cost-focused home insurance
The insurance company understands some aspects of how the customer uses the home, for case, how much electricity/gas/water he or she consumes. The total the customer pays for indemnity is based on this. The customer receives a report on home use, which provides information on how to reduce indemnity and early family running costs .
Connected and preventative protection home insurance
The insurance company understands some aspects of how the customer uses the home ( for example, how much electricity/gas/water is consumed ) or who is living there, for exercise, an aged person. The customer receives alerts when an publish is detected ( such as leaking pipe or the aged person needs aid ). If potential, the insurance company sends a qualify person to help with issues. The customer besides receives a report on home plate usage, which provides information on how to reduce policy and other family running costs .
Invisible home insurance
The home is fully protected, and the customer receives the same level of serve as with standard insurance. however, policy is automatically provided as part of the mortgage or rental contract. This means that the customer does not need to arrange insurance. If the customer files a claim ( that is, makes a conventional request to an policy ship’s company for coverage or recompense for a cover loss or policy event ), the bank or real number estate agentive role supports the customer through the action .
Self-controlled and adjustable home insurance
The customer can adjust policy based on what he or she needs and can afford. The customer can increase or decrease the level of shroud depending on whether he or she is at home. similarly, the customer can choose the level of cover charge for specific items, for case, jewelry .
Basic motor insurance
The vehicle is in full protected. The customer purchases insurance normally, for model, via a web site or agent. The monetary value of insurance is based on the type of vehicle, the customer ’ s drive record, where he or she lives, etc .
Connected and cost-focused motor insurance
The insurance company understands some aspects of the customer ’ s drive, for exemplar, when, how much and how he or she drives. The amount the customer pays for insurance is based on this. The customer receives a report on his or her drive, which provides data on how to reduce his or her insurance cost, for model, by changing driving habits .
Connected and broad service offering motor insurance
The insurance company understands some aspects of the customer ’ s drive, for example, when, how much and how he or she drives. The insurance company adjusts how much the customer pays for policy based on this. The customer besides gets enhance car serve, such as distant diagnostics of car issues, reminders for sustenance and tailored retail offers based on where he or she drives .
Invisible motor insurance
The fomite is in full protected, and the customer receives the same grade of avail as with standard insurance. however, the insurance is mechanically provided as part of the car leverage or lease agreement. This means that the customer does not need to arrange policy. If the customer has an accident, repairs are handled by the car manufacturer through a local car dealer .
Self-controlled and adjustable motor insurance
The customer can adjust policy based on what he or she needs and can afford. The customer can increase or decrease the level of cover depending on car usage. This helps to ensure that he or she does not overpay for indemnity, for exercise, by being charged less when the car is parked in a garage. however, forgetting to adjust cover could leave the customer without appropriate report to drive.
Freedom to move motor insurance
The customer is covered for whatever mode of enchant he or she chooses. This includes driving his or her own car, but besides borrowing a acquaintance ’ s car, using a bicycle or using a ride partake .