Podcast transcript: What does it mean to put customers at the heart of your offerings?

Isabelle Santenac

Hello, I’m Isabelle Santenac, the Global Insurance Leader at EY. Welcome to this podcast where we’re going to talk about our recent piece of thought leadership about personal lines and small commercial. I am with Peter Manchester, our EMEIA Insurance Leader at EY. Good afternoon Peter.

Peter Manchester

Good afternoon Isabelle.

Santenac

So, this piece of work has been first released in 2019, just before the pandemic, and it’s a way to have the view of EY on what are the trends for the next decade, and the macro scenarios about what can happen in the personal lines and small commercial. Obviously, the pandemic has changed quite a lot of relationships with customers, and so what we were predicting in the 2019 document was almost exacerbated by the pandemic, in particular on digital, on the personalization of services, etc. So, Peter, can you tell us what is your main take away from those scenarios and the trends we see?

Manchester

Sure, yes. I think, at the base of this, the need to transform, for insurers, and evolve, against some of the trends we’ve seen, has never been more necessary. Why do I think that? Because I think there are two different sets of trends. Firstly, one that’s affecting the fundamentals of the sector, and then there are a whole series of disruptive changes which are more fundamentally changing the sector over the short to medium term. We all know it’s a challenging economic environment with high-interest rates, wage and supply chain inflation, but equally we have political uncertainty, low growth, a difficult-to-predict macroeconomic picture, which is placing real pressure on the insurers today. And allied to that, if you look at the penetration of life and P&C products and SME, it’s actually shrunk in the last couple of years, and you could argue that actual growth in the sector has been driven more by price than volume or additional product sets. So, a really challenging set of fundamentals. And then, if you overlay that, on some real challenges, vectors of change if you like, competitive intensity, both from internally, with new entrants coming in, alternative capital, PE making a move into the sector and starting to acquire particularly in the personal line sector, but then externally, and we know that a lot of the OEMs (Original Equipment Manufacturer) are looking at setting up personal lines carriers themselves and are starting to think about how they create that infrastructure.

So, competition’s important, but at the heart of it is the customer. As we know, customers don’t take their cues in terms of service and elegance of service from insurance, they take it from the global tech firms or the big retail players, but I think now it’s become clear that it’s the single-most dominating factor in insurance, how do you actually gain access to and retain that sort of customer perspective? And it’s clear from the research we did that people require and are looking for more simple, more digitally enabled products with a more frictionless experience overall.

Santenac

Yes, and it’s interesting, we were together with some board members of large international insurance companies, and the customer experience, how to put the client first, is I think at the heart of every strategy today. But it’s easy to say, maybe less easy to do. And in our document, we segmented the customers into nine categories, six for individuals and three for commercial lines, small commercial lines. And I think that’s really the key, how do you segment your population in order to target the right service at the right price for this population? So what are maybe the most important segments, or the ones you believe are maybe the most critical to address for the insurance companies.

Manchester

Yes, so if I perhaps stood back a bit before we focus on the segments, Isabelle, I think what’s very clear now, is that focusing on the customer and understanding the customer is at the heart of the agenda of insurers. And the requirements perhaps move away from traditional products, policies, claims, payments, much more to what we see elsewhere, which is solutions, experiences, creating value. And I think that’s fundamentally important. And if you break that down, how do you achieve that as an insurer? Well, A, you have to have a better understanding of your customer base. Secondly, it’s probably not you alone, you have to have a broader ecosystem of partnerships and joint ventures where you can provide multiple services to the customer base.

And then thirdly, it’s about the skills you have and the capabilities to create discrete customer journeys and bespoke customer journeys for each of those segments. The ones that stand out to me are the Virtual vanguards. These are not just the metaverse warriors who want to protect their digital assets in the metaverse. There was an interesting statistic of 85% of people who use the TikTok platform actually create material to go on that platform, so it’s a very discrete group and you need to understand the buying behaviors of that group. And I think you then go to the other end of the spectrum with the Protect My Bubble, so the people who want to have a hybrid policy which covers everything from mobility, through health, through travel, etc. If you then broke it down though, at the heart of it, it’s about do we have offerings which are tailored for the individual? Can you personalize them for the requirements that I, as an individual, have? And secondly, is it a rich digital experience, rather than a more generic and commoditized experience?

Santenac

Yes, Peter, because I think loyalty is very important, and also what is trying to be done by the insurance companies is to diversify the services. You referred to ecosystem, you referred to new entrants, and we see that loyalty may not be the first attribute to the younger generation of customers, which creates some challenges. So how do you attack them, what service do you propose? But in the meantime, you have the older people that may not be that digital who may require still a lot of advice and, of course, personalization but people who can be in touch with them on a very-often basis. So considering that, and considering the need for growth in this uncertain environment, where do you think the industry could play more or could do more to really grow, considering all those challenges?

Manchester

Yes, I was interested last week in a statistic, which said that over 5 million houses in the UK are not insured, currently. Now, some of that is economic and social issues, some of it is just we’ve not managed to convince those individuals to insure. So I think there’s definitely a market which doesn’t get picked up with a lot of the segmentation that we currently see. I think what came out of the research was it’s actually not just about the customer journey, it’s about the product you give them, it’s about how you tailor the offering. The challenge for insurers is going to be if you have multiple segments and you have to create multiple customer journeys and multiple service attributes, how do you do that in a cost-effective way? A lot of the answer to that is around the platforms that you create, either with your partners or yourselves, and how you sort of plug and play, whether it’s InsurTechs or other partners into that platform itself.

Santenac

So what do you think are the key actions the insurers should take to really tackle this growth opportunity, whether from a protection gap or whether from customers they don’t attack today, and also to ensure that they are not disruptive too quickly enough by other players from other industries?

Manchester

It's a great question, actually, there's a couple of things. One is to sharpen your lens. So, sharpen your lens on your customer base, understand those attributes and understand those requirements. At the heart of it, it will be about data and the ability to access and utilize not just insurance data but maybe data from non-traditional sources, to actually create those differentiated products and offerings for the customer. So I think it’s about sharpening that focus. I think it is about being more open to broader ecosystems or partnerships, to differentiate yourself, to truly create that lens of personalization and create a different offering. So perhaps being more open to those products, but equally being more open in terms of the platform that you create.

Finally, it’s around innovation. I think if you look at most insurers, innovation is perhaps little speedboats that go alongside the main mothership which sort of channels on. It’s how you can scale innovation in terms of the capability and skills you need to really start to embed that in your organization overall.

Santenac

Yes, so, Peter, a lot to do for the industry. But also a lot of opportunities ahead of them. So thank you very much, Peter. And thank you for listening to this podcast. We will do another podcast soon on the NextWave, on large commercial, which is our second phase of NextWave documents.