P&C Reports: Consumers ‘demand more from carriers’, commercial insurance should offer risk reduction rather than just damage coverage

Recent research found that global consultancy Bain & Co. consumers in the P&C insurance segment expect more from their providers.

After “years of turbulence” from extreme weather conditions to the COVID-19 pandemic, Bain says consumers not only want to be covered if something happens, they also want help to reduce and avoid risk.

Bain’s report, Customer Behavior and Loyalty in Insurance: Global Edition 2023, highlights how insurers are changing their approach to coverage and what consumers say they need. Almost 28,800 consumers in 14 countries were surveyed for the report.

Technology, including digital tools and advanced analytics, will enable insurance companies and their agents to “move from a transactional role to a broader, relationship-based consumer interaction,” according to Bain.

“Consumer demand for more risk prevention beyond traditional insurance services has led to new services,” said Henrik Naujoks, Partner at Bain & Company. “For example, a European health insurer launched new services and recruited partners such as health coaching and doctors. In some cases, the new services may mean building stronger relationships with consumers, as in Southeast Asia, where a life insurer launched online health and parenting forums that resulted in 300,000 customers signing up in the first year, with a fifth of active users did so then met with their insurance agent.”

Specifically for auto insurance carriers, Bain found that consumers want to be rewarded for driving safely.

“There are opportunities for improvement as consumers are open to sharing data with insurers and there is a growing infrastructure to use consumer data to motivate and reward risk prevention habits,” Bain wrote.

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Eighty percent of respondents said they would like insurers to embed environmental, social and corporate governance (ESG) initiatives in their offering.

“If insurers adopt a purposeful strategy, it will also strengthen loyalty and relationships with their customers,” Bain wrote.

Bain also noted that the use of digital claims has increased, “but still needs to be improved and seamlessly embedded into the omnichannel approach.”

“While the pandemic has increased access to digital tools in the insurance industry, usage is lagging behind. Consumers often use digital tools for research and simple episodes. However, for more complex episodes, consumers rely on a hybrid approach.”

Another global consulting firm, McKinsey & Co., wrote in its recently published “Global Insurance Report 2023: Expanding commercial P&C’s marketrelevance” that on the commercial insurance side of the P&C market, commercial carriers “have a significant opportunity to move forward and close the growing protection gaps – or risk losing relevance in a changing world,” in the areas of natural catastrophe coverage, transition to net-zero emissions, and supply chain and cyber risks.

According to McKinsey, there are four other “critical challenges” airlines face:

“Define a clear source of distinctiveness to compete beyond tariffs; “Expand relevance given the structurally changing nature of risks; “Access to capacity through alternative capital and public-private partnerships to compete in a tight capital cycle; and “Building the skills and talents to manage the transition from art to science.”

McKinsey recommends insurers follow suit with the most successful airlines, which were not named, and which have “doubled their investments” in certain lines of business.

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“Specialist commercial airlines have almost consistently outperformed their more diversified peers (as measured by premium growth and profitability) in both hard and soft markets between 2016 and 2021,” wrote McKinsey. “During the same period, the more specialized U.S. surplus and surplus (E&S) market grew 16 percent annually — more than three times the rate of the U.S. permitted market. Their historical resilience suggests that specialist commercial airlines are better equipped to thrive amid ongoing economic uncertainty.”

According to McKinsey, customers should also be clear about what transport companies offer in terms of expertise, products and services related to risk transfer, prevention and mitigation.

“Commercial airlines must take action to expand their relevance by closing protection gaps to meet societal desire for resilience in a changing environment,” the company wrote in its report. “Three trends in particular are driving greater protection gaps: the increasing frequency and severity of NatCat risks, the transition to a net-zero economy, and the evolution of cyber risks. These show the most pressing coverage gaps for commercial airlines. In addition, evolving supply chains and the development of trade and commerce will impact sectors such as shipping and business interruption.”


Credit: Wipada Wipawin/iStock

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