Consumers’ insurance product appetite
Our survey reveals a clear appetite for insurance products that indemnify against existing and newly emerging risks. This is greatest among those most affected economically by the pandemic but is not exclusive to them. The pandemic may prove to be a catalyst for underinsured and non-insured consumers to review their financial risks and take action.
Future appetite for insurance products can be divided into two different categories:
- Usage-based insurance – This can take the form of lower vehicle usage (a policy in which a subscription fee is paid, plus a premium based on number of miles driven) or increased time at home.
- Lower cost products – With the focus for many on financial wellbeing and the impending recession, there are also opportunities for insurers to bring down the cost of insurance, with offers to exchange personal data for lower premiums or provide a discount in exchange for installing smart sensors in homes and sharing real-time data.
The environmental, social and governance (ESG) agenda
Our survey revealed that, despite their personal financial situations, consumers show preferences for products and services that meet sustainable criteria. Nearly one-third of the respondents in our survey state they are very likely to choose an insurer that shows a commitment towards sustainability. However, the challenge to insurers is that overall familiarity with ESG is still low in the UK. Only 18% of respondents were familiar with the concept, and the majority of those who were would not pay a premium for it. The industry response must therefore educate consumers around ESG and ensure initiatives are sufficiently tangible for consumers to acknowledge the commitment.
UK consumer ESG-interest
1/3of respondents are very likely to choose an insurer that shows a commitment towards sustainability.
How the pandemic has impacted small business owners
Small businesses in the UK have faced unprecedented and unanticipated risks as a result of COVID-19, with the pandemic acting as a stress test to their financial resilience. Some of the hardest hit businesses are those that are customer facing, including the hospitality, travel and retail sectors.
The most impacted small businesses in our survey (see methodology) claim to have lost a staggering 30% or more of their annual revenue as a result of the pandemic and are more likely to be younger entrepreneurs with business revenues of less than US$275,000 per year. These businesses are first and foremost concerned with survival, expressed as both being able to stay open (66%), as well as coping with the loss of revenue they have experienced (68%).
In addition, now that the UK Supreme Court has ruled that business interruption losses resulting from the COVID-19 pandemic are recoverable under a variety of insurance policies, financial loss will be reduced for some small business owners. In our survey, 44% of small business owners have had to partially shut down their operations, which will have an impact on insurance volumes.
Small business owners’ interest in insurance solutions
When asked about their immediate post-pandemic priorities, responses were similar to the insurance consumers surveyed, with the majority saying they are likely to plan against any future crisis through opening a savings plan and paying off debts. However, the intention to consider insurance coverage is less widespread: just 21% said they plan to speak with a financial adviser, 18% claimed they would purchase new insurance products to indemnify them against future risks and 15% claimed they would increase the cover on existing policies.
As a result of their experiences, small business owners are showing interest for policies that compensate for loss of business income. Half of respondents (51%) said they are interested in an insurance product that pays three months of expenses if their business is forced to close due to the pandemic, while 44% said they are very interested in an insurance product that covers them against liability incurred from employees or customers catching a pandemic disease in their place of business.
UK small business owner product preferences
44%of respondents are very interested in an insurance product that covers them against liability incurred from employees or customers catching a pandemic disease in their place of business.
The way forward for insurers
The pandemic environment presents critical opportunities for insurers to reengage with customers and support them in a time of need. The challenge for insurers is to provide truly customer-centric products and solutions that are tailored to evolving customer needs and budgets. Products must also be delivered through channels that reflect the switch to digital.
The needs of customers are changing significantly in the context of this pandemic and are unlikely to return to pre-pandemic marketplace demands. This is a critical time for insurers to develop innovative products that help to protect against future uncertainty, while restoring customers’ financial well-being.
The pandemic speaks to the very purpose of insurance: protecting individuals, families, businesses and communities against disasters and unforeseen events. Insurers must be bold and dynamic in living their purpose and demonstrating tangible value from their products and solutions. We believe those insurers who commit to strategic change during and after a crisis will emerge as winners.
Special thanks to EY’s Katie Merelie and Emily Baylis for their contributions to this article
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Summary
The financial distress the pandemic has caused will be felt by many UK consumers and small businesses for years to come. Insurers have an opportunity to develop new products and solutions that can help restore customers’ financial well-being and security.