Bain: Consumer expectations shift to risk prevention

According to Bain & Company’s recently published report, Customer Behavior and Loyalty in Insurance: Global Edition 2023, consumers are ready for a more rapid digital approach to the insurance industry. The desire for streamlined and easy-to-use digital channels for simple insurance transactions was especially amplified by the pandemic, and telematics adoption is increasing as we see a shift in focus from risk protection to risk prevention. 

The report notes that the insurance industry has seemingly struggled to improve digital interactions as consumer behaviors and desires change, and that many insurance organizations are slow to provide customers with adequate, speedy digital tools for self-service processes, such as in digital claims. Failure rates in digital transactions, which are a direct result of slow adoption to digital self-service tools, are up to 31% in auto insurance, according to the Bain report.

Consumers largely prefer a digital interaction for simple insurance transactions, like updating an address change, paying a bill or filing a simple claim. Andrew Schwedel, a member of Bain’s Financial Services and Organization practices and leader of the Macro Trends and Futures programs, suggests that to build convenient digital tools that are easy for customers to use, organizations must consider the customers’ needs first and the channels in which these processes occur.

Schwedel says, “What I would suggest is that [insurance organizations] really need to start by thinking about the customer needs from the customer-first perspective, and what we’ve seen companies do effectively is actually organize themselves around episodes or customer journeys… and really start to deeply understand the customer pain points around those journeys and really build the experience around meeting those needs. It starts with having a very, very clear focus on which customers you’re trying to serve, and then you can actually start to organize people and technology and process around those journeys.”

As mentioned in the report, consumers do also expect to speak with an agent for more complex insurance issues, such as in the case of filing a more serious claim. Frustrations with slow or complicated digital processes, too, can lead customers to reaching out to an agent or call center for help. Customers may want human assistance when seeking advice on types or amount of coverage, planning for life savings, purchasing products with complex applications or resolving a claim, and the report emphasizes the significance of maintaining this more human element to these types of processes and situations. 

The report also calls for advancements in risk prevention tools, such as property sensors to alert of any issues or emergencies in the home or telematic devices that reward safe driving habits, as the acceptance and adoption for such technology continues to increase. Schwedel also notes the benefits of digital risk prevention tools for insurance organizations. 

“Certainly, I think the customers see a benefit from that in terms of saving money,” he says. “From an insurance company’s perspective, it gives them the benefit of having the ability to save money, as well as preventing claims, but also to get much closer to customers and have touch points to engage them in what is otherwise a pretty low-touch industry.”

Schwedel emphasizes the benefits of improving digital processes, both for the consumer and the insurer. 

“It requires much greater technology capabilities, and it often requires partnering with different firms across different parts of the experience to deliver data at the right time, to deliver services at the right time and to deliver rewards. And so it requires a real change in how they do business, but we think the value of getting that right is significant,” Schwedel states. “You can definitely create more customer loyalty and can actually improve the economics of any given customer… I do think it’s the direction the industry is going to move, and you see examples in every market-leading company adopting these services, but I think we’re still pretty early in that journey.”