Leveraging Consumer Insights Key to Success
This is the fourth in a 12-part series of “The Korea Times . the Boston Consulting Group (BCG) Joint Project” designed to identify new realities in the post-crisis world and provide winning strategies for leading Korean firms in 11 key industries. In cooperation with BCG, The Korea Times will look into a wide variety of issues both in the global economy and major industries. .. ED.
By Kevin Lee
Partner and Managing Director, BCG Seoul Office
The financial crisis has tarnished the image of financial
services as a whole, but it has burnished the image of institutions that are perceived to be safe or even staid. In this respect, the insurance industry, while far from immune to the effects of the crisis, is in a relatively strong position. The hallmarks of insurance, security and stability, are top of many consumers minds.
But translating these priorities into new demand and higher rates of retention requires a deep understanding of customer behavior. Understanding how attitudes toward insurance and how the crisis has changed people's view of the industry, is the first step in tapping the full potential of consumer insight.
According to a recently conducted study on consumer perception in mid-2009, behavior is imbued with a new awareness of the value of thrift, and most customers plan to continue searching for deals even after the crisis subsides.
To the extent that people are "trading down" in insurance, expect this behavior to focus mainly on motor vehicle insurance, which has become commoditized. In other categories, consumers are interested in shopping around, but they are not inclined to make a decision based only on price. They place a higher priority on long-term security and give significant weight to a company's reputation when making a purchase decision.
The second step is to segment customers on the basis of their perceptions about insurance, rather than just according to income, wealth or life stage (such as student, young worker or senior) to determine how they can best acquire, serve and retain clients.
This segmentation should then be enriched with insights into purchasing and channel preferences, as well as the keys to loyalty.
To arrive at a more accurate and actionable division, one that can steer the development of marketing campaigns and product portfolios, a number of dimensions, such as (i) Active vs. Passive (ii) Relationship seeking vs. Independent (iii) Peace of mind vs. Necessary Evil (iv) Involved vs. Indifferent (v) Feeling well insured vs. Not well insured, can all be considered in order to categorize consumers according to their attitudes and motivations.
These measures should enable insurers to pursue a range of actions that will spur growth and enhance retention. A company that has developed a refined understanding of consumers can, over time, adapt its marketing campaigns, sales techniques and product offerings to suit specific groups.
It might even roll out new brands that appeal to a particular niche. Insurers can also take immediate steps to leverage consumer insight. In a study of consumer perceptions about the insurance industry, customers endorsed several measures that would have a positive impact on their attitude toward an insurance company.
*Make the most of rare moments of truth. Insurers have few opportunities to leave a lasting, positive impression on the consumer. The claims process is the definitive moment of truth ― the time when the insurer does something that has a direct and substantial impact on the customer's well-being. An insurer can make a strong impression by being there when the policy holder needs support ― not just over the phone but in person. In addition, firms should try to manufacture moments of truth that are separate from claims. Many consumers said their company had called to say that their rates were being reduced. These customers felt they were being treated fairly, which helped build loyalty.
*Make insurance more tangible. Many insurance products remain dormant until customers need them ― that is partly why they are described as intangible (and hard to appreciate). Insurers need to make their presence felt, and they can do so by describing some of the outstanding efforts they have made in response to claims. Some, for example, are able to mobilize substantial resources in response to natural disasters. Other companies find ways to play a visible role on a regular basis. State Farm Insurance has partnerships with several state highways to provide safety patrols. The patrol vehicles are painted in the company's colors and reflective signs along the highway bear the firm's name, along with the number to call to request free roadside assistance.
*Increase transparency. Companies can build trust with consumers by demystifying their products. They should explain terms and conditions as clearly as possible, spelling out exactly what is and is not covered. And when premiums rise, they should say why. That can help minimize the risk of alienating customers, particularly if the company makes it clear that premiums are used largely to pay claims.
In short, insurance companies have an opportunity in both the near and the long terms to leverage a better understanding of consumers.