Banks and insurers fall short on customer loyalty
Asia Pacific banks and general insurers are missing growth opportunities as their existing customers shop around for better deals from their competitors, according to new research from Ernst & Young.
Ernst & Young surveyed over 9,000 retail banking and general insurance customers in Australia, China, Hong Kong, New Zealand and Singapore and found that customers in both sectors are feeling unappreciated, unrecognised and under rewarded by their main provider.
The research found that many Asia Pacific customers have more than one product outside their main bank (47%) and insurer (55%). They are also increasingly shopping around for a better deal for new products rather than go to their main provider.
Andrew Price, Ernst & Young’s Oceania Financial Services Sector Leader, says: “Banks and insurers are focusing on attracting new customers to the detriment of their existing customer base. Customers who are loyal to their main provider are not being provided with the incentives to give them more business.
“Attracting new customers requires significant investment and effort - it makes sense for banks and insurers to redirect some of these investments towards existing customers to reward and promote their loyalty.”
According to the research, customers with multiple products with their bank or insurer feel their loyalty is not appreciated or sufficiently recognised. While 62% of banking customers believe their bank is aware of their multiple product holdings, only 29% of these feel they are being rewarded for this loyalty. And while almost nine out of ten insurance customers believe that loyalty is important, 41% feel their insurer does not recognise their loyalty.
“The situation is that banking customers are not incentivised to buy more products through loyalty programs that offer existing customers real savings on products, such as interest rate reductions on loans, or exclusive access to value-added services,” said Mr Price.
“On the other hand, insurance customers are confused by the discounting programs on offer and don’t see these as sufficiently rewarding their loyalty.”
“Banks and insurers need to create more compelling reasons for customers to hold more products with them. Customers want their main bank and insurer to recognise their loyalty and offer them timely and personalised products and services that aligned to their current and future needs, using their preferred communication channel.”
The loyalty expectation gap is contributing to low advocacy scores across the region. One-third of banking customers and nearly 40% of insurance customers would not recommend their main provider.
However, despite their dissatisfaction, customers in both sectors are currently being restrained by inertia and apathy, with very few planning to change their main insurer or bank.
“This is should be a wake-up call for banks and insurers, as there will come a point when the customers see that making the effort to switch providers is worthwhile. Clearly, this is a compelling reason for banks and insurers to better understand their existing customers and meet their needs, before they start shopping around,” said Mr Price.
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About the research
The research comprises two surveys: Retail banking in Asia Pacific (pdf, 1.4mb) and Understanding customer behavior in general insurance across Asia Pacific (pdf, 1.6mb). The customer surveys were conducted in May 2010 using an internet-based questionnaire by an internationally recognized research firm. The total sample size was 9,444, which is statistically significant across all geographies.
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