By Jason Hemingway, CMO, Thunderhead

The relationship between insurers and their customers is breaking down. The digital revolution has changed ­– and continues to change – customer behaviour and expectations.Customers operate in digital communities where site reviews and popular recommendation platforms lie outside marketers’ control. And while digital consumers are increasingly time poor with shorter attention spans, they are also more empowered and can shout louder than ever when things go wrong – and insurers have, so far, struggled to keep up.

Highly regulated and challenged by market forces such as the rise of aggregators, the protection insurance sector has evolved over time to place policy at the centre of the relationship with their customers, often failing to focus on the customer themselves. Moreover, in an effort to remain competitive and profitable, insurers have put the spotlight on operational efficiency which has driven down the cost of internal processes, but often left the customer as an after thought.

This has created an engagement gap between what customers now expect from a relationship with their insurer provider and what is actually delivered.

The latest report from The Syndicate, the research arm of Protection Review, which assesses consumer attitudes towards protection insurance, reveals over half (51%)of UK consumers wouldn’t consider themselves a loyal customer of their insurance provider. The report highlights the engagement gap, with trust in insurers at an all time low. Poor relationships between insurers and customers and an emphasis on policy and price mean that the customer has been forgotten. The biggest problem facing today’s protection insurers is not developing more innovative policies, but rebuilding engagement with customers.

So what key trends were identified in the report and how can protection insurance providers begin to bridge the gap and re-engage dissatisfied and distant customers, before they are lost for good?

Regaining lost trust

The Syndicate report exposes a serious issue with trust when it comes to protection insurance products and providers. When asked why they wouldn’t purchase protection insurance, the third most frequently cited reason was that consumers didn’t trust insurers to pay a claim. The majority expressed how savings served as a more reliable (55%) and flexible (59%) way of preparing for potential financial problems than protection insurance.

Improving interactions across all touch points to create one-to-one relationships with customers is vital to rebuilding trust. In addition to the general lack of communication and poor and disjointed customer journeys, as highlighted in the report, protection insurers are failing to personalise interactions, with just 9% of respondents feeling their insurance company regularly provides relevant offers and services. Personalisation is crucial as 65% of customers have a reduced opinion of an insurance provider if they receive non-tailored or inaccurately targeted information. Only 11% of consumers are very confident their insurance provider is aware of previous conversations – which may take place across multiple channels – leading to frustration when they have to frequently repeat information.

To build trust and repair broken relationships, protection insurers must ensure their conversations are consistent, relevant, and useful across the customer’s entire journey. For example, the report indicates consumers are likely to take out protection insurance at major milestones in life such as getting married, buying a house or having a baby; insurers should be ready to have relevant conversations with them at these key moments in life.

Why price is not the answer

When considering protection insurance, consumers are often focused solely on the financial cost. Price is named as the most important factor when choosing a protection policy and is also cited as the number one barrier to purchase, even though consumers consistently overestimate the cost of protection insurance expecting it to be far more expensive than it really is. This situation is exacerbated by aggregators and comparison sites, which have driven an obsession with price, pushing value to the sidelines.

Rather than concentrating solely on price, protection insurers must re-engage with their customers and shift the focus to value. Consumers frequently do not understand the value of protection insurance – making it a grudge purchase – and many don’t think they need it. The casino mentality of ‘it won’t happen to me’ is extremely pervasive. Insurers need to effectively communicate with consumers to explain the value of protection insurance to their audiences – both in terms of the value of the product and the value of the brand. Value must be conveyed not only at the point of sale but throughout the entire customer journey, for example, from the moment a potential customer first researches insurance providers, through to final purchase.

The opportunity of youth

Closing the gap with past and present customers is always going to be a challenge. However, there is a ray of hope for insurers in the form of younger audiences who – the report reveals– are less sceptical about protection products than older generations. That said, customer expectations among this demographic are far greater than they used to be – they call the shots and insurers must be ahead of the curve if they are to improve trust with younger customers. These audiences are less focused on price, seeing ease of purchase as more important, and may be willing to pay more each month if it reduces the time taken to apply for a policy. These age groups are waiting to be engaged, so it is essential insurers act quickly to communicate the value of protection insurance, before they too become blinkered about price.

Protection insurance providers also need to consider the channels chosen to interact with these audiences, who are using devices such as smartphones and tablets to research and buy protection policies. While only 5% of consumers currently have an insurance app on their smartphone compared with 45% for banking and finance, this figure looks set to grow rapidly in the future. It is more important than ever to join up channels to have personal, relevant, and consistent conversations with customers with every interaction. Building a one-to-one relationship with young consumers is the biggest opportunity for insurers– one they can’t afford to miss.

Bridging the engagement gap will be no mean feat for the protection insurance industry, but it is not an insurmountable challenge. Insurers have the opportunity to re-engage audiences before the gap gets even wider. By joining the dots across the customer journey, listening and understanding their customers wants and needs to build trust, shifting the focus from price to value, and developing one-to-one relationships with more receptive, younger audiences, customers and their needs can be brought back into focus. This is the time to bring the industry into the 21st century.