Solution Partner Views
Can Insurance Aggregators Attract Loyal Customers?
Just when you thought Google couldn`t possibly come up with another successful line of business, it tacks “insurance aggregator” to its resume. Indeed, Google Compare has been in operation in Great Britain for two years, and now, having partnered with American auto insurance comparison site Comparenow, has made Google Compare available to consumers in the United States as well.
A New York Times article this past January brought to light the effect the growing number of insurance aggregators has on agents` jobs. But jobs aren`t the only casualty brought about by insurance aggregators. Could insurers potentially lose out on quality consumers who are less likely to make a choice based on price as opposed to what the insurer offers? Does it make sense to resist the draw of “easy” business and instead put extra effort into differentiating your products or company to draw a more loyal consumer base? And ultimately, is all business good business?
The Aggregator as the Great Equalizer
Each year, U.S. insurers spend a hefty sum on advertising. The largest spend by a single insurer was $935.1 million in 2013. This level of investment is indicative of the importance insurers place on attracting new customers.
But not all insurers have the means to cast a wide and seemingly unfocused advertising net. They can`t afford to spend millions of dollars to advertise during the Super Bowl and get their brand name out there. Aggregators, therefore, have become the great equalizer, allowing insurers with smaller marketing budgets to gain the same reach as big spenders like Geico.
There are many aggregators vying for consumer attention. Companies like Esurance and QuoteWizard—and now Google—are trying to capitalize on a very lucrative market. To give you some idea of the market size, the Insurance Information Institute found that insurers wrote $481.2 billion in premiums for P&C insurance (auto, home and commercial) in 2013.
Because the object of the aggregator is to offer comparisons based on price, it`s safe to assume consumers using them to find insurance products are price-sensitive. Easily finding a lower price is all the temptation these consumers need to switch insurers at renewal. Furthermore, price-sensitive consumers buying online without an intermediary (agent) to provide advice may end up under-insuring (failing to choose the right options/choosing limits that are too low). This can lead to an unsatisfactory experience during a claim—and provide another reason to continuously compare options at renewal.
The point here is the aggregator may indeed be the great equalizer in terms of the number of consumers an insurer can attract. But unless the insurer is prepared to consistently undercut the competition`s price, the aggregator strategy may not be one insurers want to play.
Attracting the ‘Quality` Consumer
The “all comers” strategy isn`t for every insurer. Many see greater benefit in attracting consumers with the intention of actually retaining them for the long haul: “quality” consumers. These insurers leverage a couple of different tactics to achieve this goal. The first is identifying profitable segments and then designing products, offerings and campaigns to attract those segments. This segmentation is not just about product design, but also how services are packaged. For example, a young person with a lower income may have a discounted package that allows for online access only.
With his package, he pays a lower price, but must file all claims online, and correspond with agents through an online portal. Conversely, a retired couple may buy a premium package that includes 24/7 access to a call center, and claims that are handled by an agent who visits the couple at their home.
Cross-selling and up-selling by improving engagement and maximizing touch points is another way to attract and keep the quality consumer. For example, if a consumer has multiple products through one insurer, and perhaps gets a discount because he is paying for a bundle, he or she is more likely to stay with that insurer. Likewise, a consumer who has had a pleasant claims experience because an agent made certain he wasn`t underinsured will be more likely to recommend the insurer to others.
If you price correctly and refine consistently, insurance aggregators can bring in a deluge of business. But consider carefully whether this business is retainable. A strategy that competes not on price, but instead on your ability to offer ongoing value, attracts more loyal customers. The decision on which approach to take depends solely on your business strategy.