Insurers, insurtechs, vendors and brokers are challenging past practices and investing in new ways to improve customer experience. Customer experience is subjective and there are disagreements on what the ultimate customer experience looks like. Unanimously, though, most agree that it is the customer who wants it anywhere, way, when they want it.
Technology is making it easier for customers to get their insurance experience as they want it – multi-channel. The emphasis beyond that has been around self-directed insurance models, like D2C. They promise savings, ease of use and great customer experience.
Even brokers, themselves, are engaging with online self-directed portals to improve customer experience. But self-directed insurance purchasing is done at your own risk.
Insurance is not a Candy Bar or a New Car
The intangible product/service of insurance is not like a candy bar, a new car or a big screen tv. It generally won’t make someone happy no matter how much you buy or spend. It won’t make others jealous or admire you. If it was optional, most wouldn’t even buy it at all.
The experience of buying insurance is similar to taxes and death; Inevitable and unpleasant. The assumed goal for most customers is to minimize the cost of insurance (or is it?). Reinforced by most insurance marketing messages is saving you money on insurance.
Online marketers, who equate insurance buyers to eyeballs and clicks, are heavily focused on price comparison and simplified processes that appeal to the price sensitive. The dream is that a slicker online experience will “improve customer experience”.
Insurance is Different
Insurance is different and shouldn’t be sold like a candy bar or new car. While most people wouldn’t buy it if it was optional, everyone needs insurance. Unlike tangible products, where the purchase is often optional, not mandatory.
Comparing different insurance options by price is the worst way to buy or sell insurance. The most important component of insurance is what is covered and what is not covered. As with the perils of flood and earthquake, it will cost more in the areas that need it the most.
The problem is that insurance does not automatically include those perils. Self-directed purchasing insurance by price through an online portal won’t include those vital coverages. Or, even worse, the insurance purchaser may not even be given the option or know where to go for quotes on flood or earthquake insurance. It all adds up to a potential insurance coverage failure and, in some cases, catastrophe.
Insurance professionals possess knowledge that selling a policy that does not contain protection from known insurable hazards is a bad decision. Unfortunately, buying insurance directly without a broker makes the insurance purchase a risky decision. A decision with only one person to blame if something goes wrong.
Would you buy a car that has no tires – what is the point? Even at a great price?
However, there are many more considerations than price in the purchase decision. Two examples immediately spring to mind. Overland flood insurance and earthquake insurance. Neither of these coverages are included in standard policies (for either commercial or personal lines). With the perception that price is the only consideration, the plethora of online and direct sellers using price as its distinguishing feature has created massive gaps in coverage for homeowners.
Two examples of where this may be a problem is with earthquake near St. Louis (the New Madrid Seismic Zone) and flood in Houston. The New Madrid Seismic Zone is one of the most active and dangerous earthquake prone areas in the US. In 2000, about 60% of all homeowners purchased earthquake insurance. By 2022, that number was down to 12%!
As of August 2016, just 15% of the 1.6 million homes in Harris County, where Houston is located, had flood insurance (flood insurance was available to purchase, so that wasn’t the issue), according to the Insurance Information Institute, and only 28% of the homes in “high-risk” areas for flooding. That means that 85% of all homes did not have flood insurance that could have purchased it separately.
That is a lot of underinsurance which directly comes from misunderstanding the importance of coverage to your purchase decision. In many cases, few chose to be underinsured. What they chose was a cheaper price without any actual advice on coverage. Here is where an insurance agent or broker would have been helpful. However, the many ways to buy insurance without a broker/agent/producer have grown exponentially. Fortunately, this affects personal lines customers to a far greater extent than commercial. The point has been made.
I Got a Guy
Notwithstanding the ultra-price sensitive insurance buyer who only shops insurance on price alone, this next section applies to most everyone else.
As an insurance purchaser the best experience is one where you don’t have to think about insurance at all. You just have “a guy” (or person) who knows you and ensures that your interests are taken care of within your budget. They take the boring mundane task of insurance and update it as necessary.
There is a reason why P&C brokers, despite higher distribution costs, longer waiting times and accessibility, still distribute over 50% of all insurance and almost all commercial insurance. That reason is that brokers (or producers within the brokerage) offer excellent value and “piece of mind” for an intangible product/service most people would rather not deal with at all.
Technology Making Brokers More Relevant
Where digital insurance marketers are focused on eyeballs and clicks, insurance producers and service representatives are woven into the fabric of the communities they serve. There is a big problem with broker distribution, but it isn’t with producers. The problem is that it costs close to 1/3 of the total cost of insurance to distribute. Over 70% of those expenses are directly related to the manual nature of insurance for both brokers and insurers as well as the friction that the current vertical creates.
We use technology to enable producers to perform their role better by eliminating manual tasks, enhancing the overall risk management process and speeding up the sales process in an enhanced multi-insurer environment.
By reducing the friction and manual processes we create transformational rewards for customers, producers and service representatives who serve them and our collaborating insurer partners.