Accenture Study Values Insurance Customer Churn at up to $470 Billion

Failure to keep pace with rising customer expectations has resulted in a “switching economy,” where digital mastery is key to market differentiation.

(Image credit: Dollar Photo Club.)

Customer defection due to declining loyalty and commoditization of product could represent as much as $470 billion in life and P&C premiums globally, according to a new Accenture study. Based on Accenture’s Global Consumer Pulse Research, the study gathered responses from more than 13,000 P&C and life insurance customers in 33 countries.

The Accenture Strategy Report “Capturing the Insurance Customer of Tomorrow” found that only 29 percent of insurance customers are satisfied with their current provider. And as satisfaction has declined, perception of commoditization has increased: the study found that 21 percent of customer believe that most insurance carriers are the same in terms of their products and services—as opposed to only 14 percent last year.

The study’s findings suggested that declining loyalty has a corrosive effect on carriers’ cross-sell opportunity. Fewer than one in six respondents (16 percent) said that they would definitely buy more products from their current insurance provider. Only one in four (27 percent) rated their insurance provider’s trustworthiness highly, and nearly one in four (23 percent) said that they would consider buying insurance from online service providers, including companies like Amazon or Google.

(Related: Consumers Happy to Make Amazon, Google their Insurance Company – Accenture Survey)

“Today’s insurance customer is more empowered, more social and has higher expectations of his/her providers,” comments John Cusano, senior managing director of Accenture’s global Insurance practice.  “The study data indicates insurers are not keeping up with rising customer expectations, leading to increased customer dissatisfaction with insurance providers. This has created a ‘switching economy,’ which threatens traditional insurers by giving the advantage to companies most successful at exploiting digital technologies.”

Other findings of the study indicated that customers may be responsive to insurers digital efforts to engage them. Nearly half (47 percent) of respondents said they want more online interactions with their insurers.

Digital efforts are particularly important for the purchasing process itself, the study suggests. In the past six months, half (49 percent) of P&C consumers purchased a policy online, with two in five (41 percent) using a mobile phone to make the purchase. The percentages are even higher for customers in emerging markets, with 57 percent of P&C consumers there purchasing a policy online, and more than two-thirds (69 percent) of those using a mobile phone to make that purchase, according to Accenture. While many consumers globally are using online tools to purchase insurance products, only 15 percent said they are satisfied with their insurers’ digital experience.

Partnering with Nontraditional Players

“Leading insurers realize the need to offer a broader range of innovative products and services and create a differentiated customer experience, which will likely require partnering with nontraditional players,” says Jean-Francois Gasc, managing director, Insurance, Accenture Strategy, Europe, Africa and Latin America. “As a result, traditional insurance providers face a stark choice: embrace digital and customer-centricity, or become a highly efficient manufacturing utility, leveraging capital and digital technologies to provide low-cost insurance product manufacturing and servicing. Those who do neither are likely to lose out in this switching economy.”

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For over a decade he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at AnthODonnell@IIReporter.com or (503) 936-2803.

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