How Covid-19 is changing customer preferences
Digital transformation has taken on a new meaning since 2020. Insurers must respond with models that focus on customer needs. Mike Reeves, Vice President Life Solutions at Hannover Re US, describes how customer preferences have changed.
The pandemic has had a profound impact on the way we live and interact, and the world that we knew before 2020 will never return in quite the same way. We must adjust to new ways of working, new values and priorities, and new demands. Above all, we must create better protection and resilience, so we can manage risks more effectively.
Protection is, of course, the essence of insurance, and Covid-19 has underlined how risks can multiply and leave us exposed on so many levels. From health insurance and business interruption cover to life products and workers’ compensation, Covid-19 is changing buying behaviour and attitudes towards risk. In turn, insurers must meet customer preferences with new business models.
Rising demand for digital engagement
Covid-19 has accelerated digital transformation across all industries and sectors, and insurance is no exception. Digitalisation and a growing focus on customer experience were noted trends before the pandemic, but Covid-19 has dramatically increased the shift to online and mobile solutions.
Thanks to the digital experience offered by brands such as Amazon, consumers increasingly expect the same level of engagement and personal focus when buying insurance. Today, it’s vital to be customer- centric rather than product-centric, and to provide insurance products through digital platforms that are built around customers’ needs. Digital adoption is now mainstream and no longer tied to age, and the altered reality due to Covid-19 means it’s imperative for businesses to think ‘digital first’.
This is underlined by research from PWC (Anshu Goel, Susmitha Kakumani), which surveyed 6,000 US consumers at the height of the pandemic in 2020. The survey revealed that 41% said they were likely or more likely to switch providers due to a lack of digital capabilities. Across EU markets, research from EY (Benjamin Meunier, Kris Volkaerts) showed that while 28% of consumers favoured digital contact with their insurers before March 2020, this number jumped to 43% once Covid-19 hit.
Predictably, although a ‘millennial mindset’ now transcends generations, young consumers are the most vocal digital advocates. Of those aged 18 to 24 in the PWC survey, 53% said they were likely to use digital channels to engage with their insurers within the next 90 days, and 49% said they were likely to purchase usage-based insurance.
Greater focus on life and health
It’s hardly surprising that demand for life and health insurance has grown since the start of the pandemic. The golden age for these policies was the 1950s and 60s, with a high take-up from younger generations, but there has been a steep decline in interest over the decades because of other financial priorities. However, Covid-19 has raised awareness of health and wellbeing, and now life and health insurance is a hot topic.
For example, CNBC (Greg Iacurci) reported ‘panic buying’ at the end of 2020, and a survey by Money (Paul Reynolds, Martha C. White) from February 2021 highlighted the growing appeal of life insurance for younger generations. Given this demographic’s affinity for digital solutions, there is an important opportunity here for insurers who can build life and health products on an engaging digital platform.
Adapting to the new normal
The growing interest in life and health cover is just one aspect of a changing relationship where insurers must maximise their digital offerings to reach all customer segments and ensure protection as we emerge from Covid-19. In the post-pandemic era, customers will expect to see the continued development of the kind of digital initiatives that were the mainstay for business continuity and customer service during social distancing and lockdown.
That means automated and accelerated underwriting to deepen the connection with customers and meet their changing needs, whether for life and health cover or property and casualty products. And it means harnessing ever-richer data sets to understand individual circumstances and insurance requirements and provide digital distribution channels that promote a positive customer experience.
New era, new insurance model
Covid-19 has made the world seem more fragile and life less certain. Risks have increased and people’s lives and routines have changed in so many ways. Digital transformation, already well apparent, has had to speed up to support these changes and accommodate new behaviours and priorities.
As consumers become more selective and demanding, and greater emphasis is placed on health and wellbeing, technology must shift the focus from products to people. Only sophisticated digital models can meet the needs of today’s insurance consumers, whose expectations are being shaped by big tech companies and the chastening experience of the pandemic.