Why Smart Insurance Companies are Going Direct to Consumer

Insurance companies are comparatively late to join the direct to consumer movement, with retail, manufacturing and travel leading the charge.

For traditional insurance companies, digitization is a necessary step for progression, made more challenging by the regulatory risks shrouding this industry and putting a pause to its development.

But today, more and more insurance companies are overcoming these hurdles by adopting a direct to consumer model.

This guide explains why insurance companies are taking a more direct approach, and what it takes to make it work.

Limitations of the traditional insurance model

For those less savvy with the ins-and-outs of insurance, it’s a confusing world of legal small print and behind-the-scenes involvement from brokers and underwriters.

This is where the traditional insurance model and modern consumerism come to loggerheads.

With consumers more inclined to really ‘get to know’ brands and products before making purchases, the somewhat impenetrable nature of insurance makes this challenging.

Parallels can be drawn with the online banking industry, a similarly complex, legislation-driven sector, which has seen enormous shifts in its consumer communication methods, with key players like Monzo and Revolute acting as frontrunners.

Insurance is following suit, reinventing the game and creating truly consumer-centric models that break down barriers to communicate directly with their audience.

Building customer loyalty

Historically, is has been difficult for insurance companies to build long-term relationships with consumers.

Third-party comparison sites like confused.com and moneysupermarket.com perpetuate a price-led market, making it challenging for brands behind the pricepoints to demonstrate their full offering.

Cost, therefore, becomes the key differentiator, negating all aspects of the brand’s ‘personality’ and messaging needed to evoke trust and build lasting relationships.

Insurance companies are now realizing that if they want to promote loyalty, they should move away from third parties and talk to consumers directly.

This can only be achieved by understanding them on a more personal level, including the motivations, perceptions and behaviors that can be leveraged to build long-term connections.

Meeting the needs of today’s consumers

Here’s what we know to be true of modern consumers:

  • They’re owning their purchase journey.

Search engines are now the primary brand discovery channel at 37%, and 52% use them for brand and product research.

  • They want authentic brand experiences.

27% want their favorite brands to improve their knowledge and skills, and 22% use ad-blockers as they feel too many ads are annoying or irrelevant.

  • They love to use brand sites.

55% visited a brand’s website last month, and 32% carry out research on product or brand sites before making a purchase

  • Social commerce is on the rise.

29% say researching or finding products to buy is their main reason for using social media, and 25% follow brands they’re thinking of buying something from.

From buyers to users: an industry shift

These trends are changing insurance as we know it.

Traditionally, taking a “products and processes” approach, the sector is seeing massive transformation.

In line with global trends, consumers are buying insurance products and services through more direct means, forcing businesses to pay more attention to the customer journey and user experience.

This emphasis on ‘user’ over ‘buyer’ represents a major shift in thinking.

Rather than seeing consumers as ‘buyers’ in the traditional sense, going direct to consumer means understanding your audience in a new light: as ‘users’ that repeatedly use your goods and services.

This means forging new and lasting relationships that far exceed those of the past.

As Lowell Putnam, co-founder and CEO of Quovo, puts it: “Direct to consumer brands market their products as goods a customer uses repeatedly and develops a relationship with, rather than a one-time transactional purchase.

As a result, a sense of loyalty to the brand emerges through the repeated use of its products. Like mattresses and eyeglasses, financial services may not be exciting, but they are personal.”

The benefits of going direct to consumer

One-to-one contact

Advice-driven communication through live chat functions provide a useful medium for direct consumer contact.

This bespoke level of customer care increases brand affinity for consumers and provides brands with an important touchpoint from which to gather consumer data.

According to Epsilon research, 80% of consumers are more likely to do business with a company if it offers a personalized experience.

For some companies, it’s not viable to have an employee responding on the end of the line, so chatbots offer an alternative solution.

Online banking companies use this to excellent effect, with Monzo responding to all queries in under 13 minutes, and Lloyds Bank providing an instant-response chatbot that establishes your requirements before passing you to the relevant department.

Purchase journey ownership

Direct to consumer insurance companies can develop and take complete control over the purchase journey, putting the incremental steps in place that move customers down the funnel.

Deep consumer insights are needed to build this journey to begin with, but once in place, end-to-end ownership of the purchasing journey enables insurance companies to retrieve data at each stage.  

This feedback loop, combined with third-party data sources like GlobalWebIndex, provides invaluable insights on consumer patterns to guide process innovation.

Customization

The more personal relationships insurance brands can build with their audience, coupled with the consumer data they’re able to gather, makes forming and delivering customized solutions possible.

Online application forms and free quotes available via apps mean users can input their information when they want to receive instant quotes.

The system allows the customer to choose the coverage they prefer based on their insurance needs, trimming off the excess ‘fat’, allowing them to see exactly what they’re buying into.

Again, this data can be retrieved and fed into the loop to highlight demand for specific products.  

Simplification: online underwriting

There’s no getting around the fact that underwriting is complex, yet necessary. But innovators in the industry are speeding up the process.

Some direct to consumer insurance companies have established a rule-based underwriting engine to assess the risks and provide online quotes based on the submitted data.

At the moment, this technology is only appropriate for less complex risks, but for smaller claims insurance companies this provides the perfect solutions to improve processing speed for the consumer.

Alerts and reminders

Direct contact with consumers means efficient communication of important information about their accounts.

If payments are due, late or changed, the consumer can be alerted in good time. Similarly, relevant updates on policies are just a click away through chatbots that are available 24/7.

Not only does this make customers feel more secure as they’re ahead of the curve, it also increases the efficiency of the business.

Bureaucratic procedures involving payments via traditional communication methods (such as via post) can drain resource. Automation allows for much cleaner processing and deeper feedback.

Making D2C work with consumer insight

Going direct to consumer starts with data – but the right kind of data.

New expectations on brands to deliver hyper-targeted marketing combined with the increasingly fragmented purchase journey makes strategic decisions based on impactful insight is a must.

In order to achieve this, you need to look beyond what consumers do and to why they do it.

What good consumer research tells you.

Supplementing behavioral and demographic information with deep data on their attitudes, motivations and perceptions is key to delivering a customer journey that ‘makes sense’ to consumers, with messaging that resonates at every stage.

Case study: Lemonade

What they’re doing well

Lemonade provides home and renters insurance for urban dwellers, priding itself in shaking up the insurance industry, offering total transparency that’s honest and refreshing.

Their personalized messaging and disruptive outlook is neatly summed up in their strapline, which reads, ‘forget everything you know about insurance. Instant everything. Killer prices. Big heart.’

How they’re doing it

One of the areas where Lemonade stands out is in its style of communication.

The brand cuts through the jargon with plain talk around how they make their money, where your money goes, and how best to use the app.

Lemonade represents a new wave of direct to consumer insurance companies that are really getting to know their consumers, offering a hyper-personalized experience and demystifying the complexities.

Key takeaways

Going direct to consumer is made possible by the wealth of insights available

Insurance companies can meet the evolving needs of consumers through the quick transmission of simple, authentic and transparent information.

Brands will benefit from direct relationships with customers, developing a holistic understanding of what drives purchasing to shape their strategy and spark delight at every stage of the customer journey.

Click to access direct to consumer in 2019.