Insurance loyalty rises despite market challenges – Bain & Co.

Consumers increasingly value insurers excelling in ethics, legacy protection, and anxiety reduction.

Over the past decade, loyalty among insurance customers, as measured by Net Promoter Score (NPS), has improved significantly across most countries, with increases ranging from 10 to 30 percentage points.

Despite this progress, customer switching rates have risen in property and casualty markets due to increased premiums and reduced coverage, prompting customers to seek more affordable options, Bain & Co. revealed in an insight. 

Conversely, in life insurance, a carrier's reputation is more influential than price, emphasising the importance of delivering a high-quality customer experience to retain customers.

Consumers increasingly value insurers that excel in higher-order or emotional elements such as ethics, heirlooms, and reducing anxiety. Insurers that perform well on these higher-order elements see increased NPS, yet few currently excel in these areas. 

Expanding the role of insurers from merely capital providers to comprehensive solution providers can lead to greater customer engagement and improved economic outcomes over time.

Whilst growth in insurance premiums has not outpaced general economic growth, retaining customers is critical as it links to increased product ownership and improved economics through cross-selling. 

Customer acquisition, though more expensive, remains essential and requires targeted strategies based on consumer segmentation.

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Investments in digital channels and tools have led to increased consumer adoption, especially during the COVID-19 pandemic.

Digital tools have doubled or quintupled in use for research interactions and purchasing, although complex issues still often require human assistance. 

Insurers need to simplify digital processes for straightforward transactions while ensuring easy access to human support for more complex issues. 

Generative AI and connected devices offer promising opportunities to enhance customer experience and loyalty by providing personalised interactions and proactive risk prevention.

Consumers show a growing interest in risk-prevention services, particularly among millennials, affluent customers, and urban families. 

Services such as automatic device shutoff, health checkups, and remote diagnostics are highly valued. Despite improved infrastructure and willingness to share data, few consumers currently use these services. 

Outlook

Generative AI and connected devices are poised to transform customer relationships in insurance. Generative AI can enhance self-service capabilities, personalise customer interactions, and streamline administrative tasks for employees. 

Connected devices enable more precise risk segmentation and pricing, offering services tied to healthy living and risk mitigation.

Insurers must set clear goals and measure outcomes to effectively leverage these technologies. Early adopters of these innovations are likely to create distinctive value propositions and improve their economics.