Consuming Insurance Products

Using the economy as an excuse to hold off on investing in a direct channel for marketing insurance products could be costly to carriers–both in the long and short term. The slumping economy is dumping additional financial pressure on consumers, and so they are looking for the best premium, a survey conducted by Accenture in April discovered.

“The first thing that was striking to me [in the survey] is a significant majority of the people we surveyed were actively shopping for a new company to be able to replace their existing product,” says Michael Costonis, Accenture's executive director for the North American insurance industry.

“The second thing was the fact it's really all about cost–46 percent of the people looking to make a change were doing it because they wanted to decrease their level of premium,” he adds. “The fact the Internet is a good search medium and also the ability of the advertising to create awareness around cost make the direct channel the place to go to do that.”

Personal lines insurers need to find the right mix of traditional sales channels and new technology. “With what specific types of customers are insurers more effective selling and servicing through the direct channel, and which ones are better off in the agents' channel?” asks Costonis.

Consumers are looking for more information about the insurance company as well as the insurance product, Costonis found.

“[The direct channel] is not purely a price-shopping exercise but an understanding of what the policy is, what its features are, and how it meets [a policyholder's] particular needs,” he says. “If the [carrier's] step into the direct channel is purely transactional and not necessarily looking at the retention and servicing side of the equation, then it's only a half-step in our estimation.”

Costonis doesn't believe personal lines insurers are ready for the changes that appear to be inevitable with a younger market of policyholders.

“This generation–the millennials, if you will–present a unique challenge for insurance companies,” he says. “They tend to be much more technology savvy in the way they use [technology] in everyday life, whether it be social networking, dealing with their banks, or dealing with retail companies. Insurance companies need to step up to those service expectations and that level of technology enablement the rest of the economy seems to have.”

Accenture's research into insurance industry Web sites found they tend to be at the bottom of the list in terms of usability and features of an interactive nature–especially when compared with other consumer goods.

“There is a significant amount of work to be done for insurance companies to embrace better Web 2.0 technology to make it a more cohesive experience for their customers,” says Costonis.

The survey results surprised Costonis when it came to life insurance purchases conducted online. Twenty percent of those surveyed with incomes less than $60,000 reported buying life insurance products online, with the number rising to 25 percent among those with incomes greater than $60,000.

Costonis relates those numbers to the needs of the consumer. Younger customers have less complex needs than consumers who are at age 35 and above.

A key point for life insurers is to make the Web channel a symbiotic channel, according to Costonis. “Is there a way to take the Web channel and meld it directly with the agents so the agent and the policyholder can exchange information, interact, and understand product features through things such as real-time voice discussions?” he asks. “It's not an either/or situation. It's more of how do we Web-enable and meld the two channels to make it more effective.”

Costonis believes the survey points to the growing importance of the direct channel. “Agents are not going away overnight, but as the younger generation of insurance consumer continues to grow, the direct channel becomes a more prevalent way of transacting business,” he says.