On Podcast 121, Matthew Grant talks to Mark Patterson from Deloitte about its survey, The Future of Home and Motor Insurance.
The survey is the result of interviews with 8,000 consumers across 12 countries. Mark Eastham, CEO of Avantia, which sells insurance under its HomeProtect brand, joins the discussion with a view from insurance.
Talking points include:
- The importance of simplicity
- Pros and cons of embedded insurance products
- Connected devices and what’s holding the market back
- Flexibility of policy systems
- Why parametric solutions are capturing consumer attention
Download The Future of Home and Motor Insurance survey from Deloitte.
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What 8,000 people want from their insurer - Episode 121 highlights
Matthew: Mark, some fascinating insights have come out of this survey. Who did you speak to?
Mark: We ran this survey last year in Canada, the US, the UK, Germany, Italy, Japan, Australia and China. We presented eight different home and motor insurance products to consumers in those locations to ask what they wanted in the future. Our questions included asking about some of the popular ideas being explored in the insurtech community and finding out what customers thought of them.
Matthew: There are five themes you found. Top of that list is simplicity. Is that a clear signal that the buying journey is still too complicated?
Mark: Simplicity is something the industry is still struggling with, and it matches what consumers are asking for, especially in the UK. Eighty-one percent of people, across all ages and demographics, all wanted to do transactions online without talking to anyone. They want the transaction to be slick and simple, including being able to understand what they’re covered for and how it compares to other products.
There were some variations across the globe, but this is a big message for those in the insurtech community with new ideas around connected devices or something else. The question for them is whether the buying journey and the product is simple enough for the customer to understand?
Matthew: We hear about the desire for digital experiences being driven by millennials and younger generations, but you’re saying there’s less age differentiation in how people are buying insurance?
Mark: Absolutely. The digital adoption piece was pretty consistent, with some interesting variations around the globe. The UK comes out at one end of the spectrum with the highest demand for digital. Canada had the lowest demand, but being originally from Canada, I know the broker channel there is dominated by phone. But in all of the countries, the demand for digital is there and it’s consistent across all age brackets.
Matthew: The tension with simplicity is that insurers can give customers a simple buying process, but when it comes to what’s covered, there’s only so far you can simplify the wordings.
Mark: The insurance industry needs to look at different ways to explain policies to customers. Should they be showing videos or something interactive to explain the policy? All the feedback we got said people don’t read the policy, even if the wording is just a couple of pages. Insurers like Lemonade have done a great job to simplify wordings, but people don’t want to read it.
One of the products types that did take off was something we described to consumers as invisible insurance. If you think about leasing a car, the lease payment would include the insurance, so the driver is immediately covered. That was the number one product that consumers with affluent income, or in younger age groups wanted. Thirty-seven percent said, “I want a motor product that’s invisible. I don’t want to think about it, I just want it bundled in with the car.”
That’s probably the Tesla demographic, so some of the work Elon Musk is doing around insurance makes sense. That demographic wants to know what the policy covers, but they don’t want to think about it.
Matthew: Customers might not read an entire document, but if they know that certain things are excluded, they can make a decision. Do insurers need to be more explicit around what’s not covered?
Mark: That aligns with some of the data we have. Customers say they like flexibility, but it needs to be simple. Insurers like to get into a level of granularity and wording that confuses the customer. We’ve seen research from small businesses that says they would pay more for a better product, but they need to understand what comes with that option.
Matthew: Is there a way to measure how the industry is doing on this? You mentioned Lemonade and their Policy 2.0 is a big step in the right direction, but can we see things getting better in a way that can be measured?
Mark: We didn’t necessarily get that measured from the survey. There are individual examples of people doing a great job of improving their policy wordings, but across the globe, insurance transactions are not a simple process that is clearly articulated to the customer.
That’s why we see people falling back to familiarity and buying the same policy because they don’t understand the options. That came across in a lot of geographies. China was the one exception, where there was more demand for innovative policies.
Matthew: A lot is happening around embedded insurance. Not everyone will be familiar with the concept, so can you explain it and the trends you found?
Mark: From a motor perspective, it’s very easy to describe. A customer leases a car and the insurance comes with it. If a tenant rents a house, the insurance cover would be included in the rent. We gave consumers three different variations of embedded insurance for home and motor. One where the insurance was completely invisible, one where it was embedded and connected to get people the cheapest price, and another one that was connected but with additional services attached.
In the UK, customers with a high net worth or income were very keen on this for motor. It was their number one product. Similarly, if we switch to home insurance, customers in a similar demographic also picked something embedded. Overall, a quarter of everyone we surveyed from that demographic, right across the globe, picked an embedded product as their number one choice for insurance.
There was some reluctance. In the UK, we implied that estate agents would be involved in the transaction, and customers said they weren’t sure if they trusted their estate agent. If we switch to Italy, where people would do some of this through their bank, customers said they were comfortable with that. So, there is a dimension around trust in the sales channel and preconceived notions about the salesperson.
Matthew: Some of those embedded options involve customers sharing their data with more people. What feedback did you get about that?
Mark: It was the second major reluctancy, but it varied a lot by country. In Germany, customers were reluctant to share any of their data through embedded offerings, but there was more willingness to do so from customers in China.
However, going back to what started this conversation, customers want simplicity and insurers aren’t getting the mix right with embedded or connected options. Leasing a car and getting insured with no additional questions is simple. Buying home insurance and having to connect half a dozen devices to pipes is complicated. While there is some cool data, insurers need to figure out how to make it really easy for the customer.
Matthew: Of all the connected devices out there for motor and home insurance, are you seeing any that are making a difference?
Mark: From a property perspective, I’d say not on mass. There are some great examples like Neos who have introduced some innovative offerings, but ultimately it needs to be someone else leading with the device, not the insurance company. We need to wait for the market to mature, where people already have something connected and then the insurance gets bolted on. We’re seeing consumers experiment and play with this a bit, but we haven’t seen it take off on mass in any of the markets.
Matthew: We’ve seen work recently showing that consumers are more willing to buy insurance from non-insurance brands. Did you see evidence of that?
Mark: Absolutely, and it ties back to the trust elements consumers are looking for. If they already have a high degree of trust around a brand, even if their experience hasn’t been anything to do with financial services, that comes across as simple. They don’t need to research the brand as they already trust it.
Where there are preconceived negative notions, brands are going to struggle. Where there's high trust already, regardless of the industry, there's a bias from the consumer.
Matthew: Is consumer interest in variable pricing starting to change? Will it change how we sell insurance in the future?
Mark: There were positives and negatives from the survey. Consumers don’t want to see prices changing without understanding why. There are propositions in the market that have very complex ways of determining monthly costs and consumers have a real aversion to things they don’t understand. A lot of our rating factors in insurance are things that consumers don't understand. Even if those are variable, consumers want us to keep it simple.
One thing that came out was that prices should be based on consumer's actual consumption, or on things they can control. Most of the world was in lockdown during this study, so lots of consumers tried to change their car insurance policies to reflect the amount of driving they were doing. They found they couldn't easily make changes that would reap the benefits of their changing behaviours.
Matthew: One of the reasons for that is insurers don’t have the right systems to make quick policy changes. Are you seeing examples where technology is giving companies more freedom?
Mark: From a consulting perspective, Deloitte gets a huge number of calls from people looking to enable some of that flexibility via digital channels. Over the next 12 months, we’re expecting to see much richer digital capabilities out there.
The challenge again for insurers is keeping it simple and easy. Some consumers don't want their insurance company to know how they're driving, as they're worried their price would suddenly change if they brake too hard on the highway one day. They do like the idea of paying based on how much they drive but are nervous about being watched by a device, even if insurers say it's only for monitoring the number of miles.
Where customers do want more flexibility is around basic things. They've lost their job and are no longer using their car to go to work. Can they get a camera insured for the next four days? They weren't asking for overly detailed granularity. They want flexibility for simple transactions.
Matthew: The survey also included questions around parametric payments. What does the data tell you about consumer confidence?
The number one feature requested, specifically in home, was what we described as an instant payment of a pre-agreed amount post-disaster. How I read that was consumers like the idea of a no-fuss claim payment, but they probably didn’t understand some of the negatives that might come with it.
I coupled that with some of the insights we have on what people research before buying insurance. The number one factor is will the claim be paid, and will it be paid fairly? Insurers need to look at giving customers the confidence that they will get the money, but not necessarily go just purely parametric. Consumers won’t fully know what they’re signing up for.
Matthew: Just finally, I’d love to know how you managed to get 8,000 people to respond to your survey? Can you share any of your secrets?
Mark: I have to give credit to the people at YouGov, who are our primary partner on surveys. They have great access to trusted lists of consumers around the world and did some great work for us. We also took advantage of everyone being at home during lockdown and maybe looking for a few more distractions from their day-to-day jobs when we launched this.
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