Price will always be an important competitive factor for insurance companies, regardless of their distribution model or value proposition. Today, auto coverage rates are steadily rising, driven by factors ranging from annual increases in vehicle miles traveled to skyrocketing costs for damaged vehicle transport, storage and repair, which are all influencing claims expenses. As such, it will become increasingly competitive — and more difficult — for insurers to win the hearts, minds and wallets of new policyholders.
Tom Super, head of property & casualty insurance at J.D. Power, said: “Ironically, while the industry’s estimated annual ad spend now nears $10 billion, consumers say they see less differentiation among the top brands. Following a period of massive disruption and a prolonger, uneven recovery, auto insurance customers have a heightened expectation about factors such as price, flexibility and coverages. Insurers need to get more creative around customer service and delivery because the current incremental changes are missing the mark.”
While price gets you a seat at the table with the consumer and remains a critical element in how insurers compete and attract customers, its impact will continue to lessen. Insurers will need to continue differentiating themselves through services and additional offerings that provide value beyond the traditional insurance contract. This results in an untapped opportunity for insurers to offer value-added services that keep them top of mind and create additional touchpoints with policyholders.
An untapped opportunity for insurers
Many insurance companies struggle with policyholder touchpoints beyond typical activities like acquiring and renewing customers. For many insurers, these interactions only take place when there is a coverage change (e.g., additional vehicles or drivers added to a policy) or in the context of an auto insurance claim following an accident. It’s difficult to create and build customer loyalty in the absence of more frequent touchpoints.
The emerging battleground involves an ecosystem where insurers can offer more value to the customer, which results in additional moments of truth with policyholders, driving stronger retention over time. There are already data showing consumers are looking for more choice; choice in terms of how they get introduced to the carrier, choice in how they interact with the carrier and choice in how they’re being evaluated by the carrier (e.g., pay per mile pricing and usage-based insurance).
Types of benefits and services to consider
Insurers have the opportunity to build out these additional value-added services. In particular, large carriers have millions of drivers, giving them the influence to attract an ecosystem of partners that can offer myriad benefits to policyholders.
Recent research found that vehicle owners value specific features associated with vehicle ownership. This includes benefits like repair, parts and accessory discounts, mechanic hotline support, financing, mobile services and conveniences like cleaning and refueling, as well as vehicle transport for scheduled maintenance. In fact, we’re seeing a few carriers begin to leverage relationships with service and repair shops around these types of value-added services. Some are even exploring how they can weave these programs into their existing relationships with partners through the claims experience.
However, it’s important to understand that it’s not just about the perk itself, it’s also about timing — offering consumers what they need at the moment they need it — and not only within the context of the traditional claims experience. Insurers could just as easily make these discounts available via a branded site, enabling policyholders to access vehicle support offers at any time.
Recommendations for insurers
Finding new ways to retain customers is increasingly important to insurers, as J.D. Power’s 2021 Insurance Shopping Study noted that customer lifetime value (CLV) is becoming a critical metric for carriers. Creative product solutions enable insurers to integrate more deeply into policyholders’ day-to-day routine over the course of their lifetime.
For example, convenient, timely, targeted discounts to partner facilities (e.g., tire retailers, repair facilities, etc.) delivered at the moment of need (during a breakdown event) can help insurers increase the value they offer, helping them stand out in the marketplace and driving brand loyalty and retention.
In fact, Agero’s research from spring 2021 found that benefits and exclusive deals are one of the top reasons for branded insurance app downloads. More than seven out of every 10 consumers noted that loyalty benefits, such as promotions, exclusive deals and product discounts, are the most valuable feature associated with mobile app consideration and engagement.
The ability to bring these value-added services to policyholders ultimately drives more consumers to download an insurer’s mobile app and engage with them on a more frequent basis. Over time, as insurance companies exhaust the ability to innovate within the insurance contract, there is going to be a need for them to go outside the box and find new ways to engage the policyholder.
Removing friction in the vehicle ownership experience can be a way to drive differentiation and loyalty beyond the traditional insurance contract. Those insurers willing to push the envelope in finding new policyholder touchpoints will likely be the ones leading the charge as the insurance battleground shifts to one where they no longer compete on pricing, coverages and services in the traditional context.
Chetan Ghai is business leader, insurance roadside, for Agero. He works closely with the company’s product, marketing, client solutions and operations groups to drive innovation and growth within the insurance roadside line of business.
Opinions expressed here are the author’s own.