Between December 2009 and January 2010 Accenture conducted a survey of over 3,500 consumers from UK, France, Germany, Spain, Italy, Brazil to understand consumers' insurance purchasing habits and preferences. More than 1,000 consumers were interviewed in the UK.
• The pace of online adoption among UK insurance consumers has been rapid and shows no sign of abating.
• Online insurance consumers are less loyal.
• Banks' share of the life insurance market will decline in future, based on current consumer attitudes. While 22% of consumers have bought life insurance from a bank in the past, only 16% of those planning to renew or purchase a new policy in the next 12 months plan to buy from a bank.
• In spite of the challenges they face, banks have the opportunity to be the big winners from the Retail Distribution Review. 35% of bancassurance customers may be willing to pay more for personalized advice or assistance when purchasing insurance, in comparison to only 25% of all insurance customers.
Challenges posed by online purchasing and the rapid rise of the aggregator channel
Accenture's survey confirms that the internet is fast becoming the only way to purchase insurance in the UK: 63% of consumers have purchased motor insurance online; 45% home insurance; and 23% life assurance.
Over the next 12 months, 69% of consumers that are switching or purchasing a new policy plan to buy motor insurance online; 58% plan to buy home insurance online; and 40% life assurance.
UK consumers lead the rest of Europe in the extent and pace of online insurance adoption. However, Accenture's survey also reveals the challenges that the growth in online purchasing has raised for UK insurers:
• Online insurance consumers are less loyal:
o 81% of online motor insurance customers plan to look around at renewal, and only 17% plan to renew with their current provider. This compares to all motor insurance customers, where 69% plan to look around at renewal, and 29% plan to renew with their current provider.
• Online insurance consumers are more price sensitive:
o While price is the most important factor for UK consumers when choosing an insurance provider, regardless of channel, consumers that boless of channel,less of channel, consumers that bought online are more price sensitive, with over 76% of online home and motor insurance customers stating price to be a very important factor in their purchase decision, in comparison to 70% of insurance customers overall.
According to Steve Lathrope of the Insurance industry practice at Accenture:
"The impact of these trends has been exacerbated by the phenomenal rise of the aggregator channel.
"Adapting to the aggregator business model and online consumer behaviours has already impacted core insurance operations and will continue to force changes. Providers will need to develop distinctive capabilities to survive and prosper. In particular, insurers are having to face up to challenges in areas such as branding, product design, customer retention, cross-selling strategies and price-optimisation.
"The insurance company 'winners' under aggregator distribution have strong capabilities in these areas. For example, insurers with strong price optimisation and customer segmentation capabilities are able to benefit from aggregator growth, by acquiring their target customers while maintaining control of their loss and expense ratios.
"In addition to facing up to current challenges, insurers also need to be mindful of the future development of the aggregator model. Although this channel is growing market share, high levels of competition among the major aggregators means their profits are static or declining. While the channel is here to stay, aggregators now need to think through their strategic options if they are to maintain their growth ambitions, and Accenture is expecting to see a more fundamental shift in their business models in the next 2-3 years.
"While further extending their product ranges and growing market share in areas other than motor insurance, aggregators are also likely to move further up the insurance value chain and look to retain more control over the customer relationship. Aggregators are investing now to adapt their business models, and insurers need to be doing the same to stay ahead of the game.
"Insurers need to anticipate and respond to the second wave of aggregator development. In particular, they need to determine their strategic response to aggregators taking more control of the customer relationship and combat the impacts on their own retention and cross-selling strategies."