The comparison conundrum
Comparison engines continue to disrupt the insurance model in a number of problematic ways.
They’re cutting margins to the bone. And they’re forcing insurers to slim down the cover they offer, in order to top the price comparison lists – which risks leaving customers under-insured.
In home sector alone, estimates put the level of under-insurance at between 50% and 80%. That’s at least half of the households in the country – and perhaps many more – potentially unable to claim in the event of a mishap.
Insurers may subsequently try to upsell to customers they acquire via comparators, to ensure they get the right level of cover. But this isn’t always well received. Not realising that they’re inadequately covered, customers may feel subjected to a ‘hard sell’ by the provider.
Comparator sites are also diminishing insurers’ ability to differentiate themselves from the competition. Unique packages can’t be compared like-for-like, so aren’t included in comparisons. What’s more, it’s impossible to promote benefits like excellent customer service on what’s essentially a price list.
Insurers’ last line of defence against the comparator effect has been to accept razor-thin profits in the first place, then gradually increase margins each time customers renew. But the comparators are eroding this advantage too. They routinely remind customers to re-compare at renewal time, and make the switching process as quick and easy as possible.
All of this is resulting in unprofitable business. Take car insurance, for example. Many carriers are currently paying out 95% of the premiums they charge on non-black-box policies in claims. Some are even paying more than the sum of the premiums they collect.
Changing the game
So insurers aren’t making money; they’re having to sell policies that may not pay out; and they’re being prevented from building valuable customer relationships.
As for customers, they’re receiving intrusive sales calls from their providers. And they may that they’re not actually covered when they need to make a claim.
This is hardly a sustainable model for the industry.
We shouldn’t really be surprised by the bind the sector finds itself in. Its model hasn’t fundamentally changed since it emerged in 1666. It has taken the disruption of the digital age – in the form of comparison sites – to impose change.
So how can insurers solve the comparator conundrum? In my view, this is where CX and service design comes into its own.
There’s a golden opportunity for us designers to really add value to insurance businesses in this difficult climate.
To help overcome the challenges at hand, we need to start asking some big-picture questions:
What does insurance need to be in the digital world?
How do today’s customers want to engage with insurers?
How can we create the experiences they expect?
We also need to figure out how to change the comparison game, by finding ways to:
help customers to assess the cover they need more accurately when making comparisons
enable meaningful comparisons between differentiated offers
Delivering these capabilities would make comparison a contest between products and experiences, rather a race to the bottom on price. This is how design can help tip the balance back in insurers’ favour.
