Insurance | Societal changes create opportunity, disruption
Brands seek new ways to build consumer trust
Insurance brands attempted to become trusted advisors in a category known for providing products that consumers know they need but resist buying and dread using. Demographic changes, societal trends, and geopolitical uncertainty created opportunities for brands to expand in life insurance, property and casualty, and emerging insurance businesses.
Now entering their family formation years, millennials presented the greatest opportunity, as they began to consider insurance and investment products. And many Gen Xers, now in the sandwich generation and paying for kids’ college while caring for elderly parents, looked for income-producing products like annuities.
The growth of the sharing economy created a need for car and home insurance products based on access rather than ownership. Cyber threats, which dominated news around the US presidential election, generated opportunities, especially for large commercial brands, like Allianz or Zurich, to insure against data hacking and business disruption.
Geopolitical changes created uncertainties, including the fate of pending rule changes in the US that would prohibit commission-based sales because they potentially incentivize agents to serve their own interests rather than consumers’ needs. Many insurance companies favored a proposed fee-based approach because it supported their attempts to become more customer-centric, while it eliminated agent sales commissions, thus lowering costs and improving profits.
It was also a year of consolidation and disruption, with Ace acquiring Chubb, as more insurance technology (InsurTech) brands entered the market. At the same time, a potential disruptor disappeared when Google decided to end its online auto insurance comparison site.
In this context of brand opportunities and challenges, the value of the BrandZ™ Insurance Top 10 declined 1 percent, following a 2 percent gain a year ago. The performance of Chinese insurance brands contributed most to the decrease. A couple of brands based in Europe fell slightly in value, while the US-based brands improved.
Big data refinements
Insurance brands continued to improve their use of big data to anticipate customer insurance needs and to respond with relevant and timely messages. The connection between customer and brand remained relatively weak, however, as data and digitization also commoditized the category. Online aggregators continued to disintermediate brands and focus on price, particularly in the UK.
Big data also enabled brands to personalize pricing, but not without actuarial complications. Using telematics (the “black box” that records driving habits), some insurers priced policies according to actual driving history, rather than age, gender, and other demographics. But offering safer drivers lower rates threatened to undermine the fundamentals of insurance pricing by limiting a company’s ability to spread risk across a wide pool of drivers.
A UK insurer used telematics data not only for pricing, but also as a brand-building tool, analyzing the data to position the brand as a safe-driving advocate and consultant. The need for safer driving became apparent as payouts for US insurers rose. Although sophisticated electronics make cars safer, they also increase repair costs. In addition, lower gas prices resulted in increased driving, and digital devices contributed to more driver distraction.
State Farm, which markets through a network of agents that work exclusively for State Farm, took its ongoing advocacy of safe driving in a new direction. As a partner in the University of Michigan’s Mobility Transformation Center, the insurer derived insights about the development of autonomous vehicles, which are expected to improve driving safety and reduce demand for auto insurance.
Sales through agents remained stronger in the US compared with some other markets, and that may be one reason that Google decided to end its online auto insurance comparison site, thus removing one of the biggest potential industry disruptors. At the same time, the peer-to-peer sector continued developing with the launch of the Lemonade brand, operated by a team that includes former executives from AIG and ACE. Other startup disruptor brands include Friendsurance in Germany and Brolly in the UK.
The effort to connect with consumers and strengthen relationships took many forms. Geico, which sells direct, continued to advertise extensively with The Gecko lizard, its well-recognized and cheeky brand representative. The brand focused on price with the tagline, “Geico could save you 15 percent or more.” The brand led the BrandZ™ Insurance Top 10 in value appreciation with an increase of 16 percent.
MetLife dropped the Peanuts cartoon characters that helped make the brand feel warmer and friendlier during an association lasting over 30 years. The decision came as MetLife prepared to spin off its consumer life insurance business to focus instead on its corporate business.
Activity in Asia largely shaped the value fluctuation of the BrandZ™ Insurance Top 10. AIA, which began in Shanghai in 1919, benefited from the economic growth of the Asia-Pacific region where it serves 18 markets. AIA also increased its stake in an Indian joint venture with Tata.
In China, the insurers generated interest among millennials, according to BrandZ™ research, but the insurance category declined in the BrandZ™ Top 100 Most Valuable Chinese Brands, as government regulations cooled market growth that had been driven in part by products that, to the regulators, resembled gambling more than insurance. Ping An increased modestly in value because of its size, its enormous network of agents, and its extensive product offering of financial services.
Of the European-based brands, Germany-based Allianz and France-based AXA declined slightly in brand value, impacted by low interest rates and geopolitical uncertainty, including Brexit. And Zurich, based in Switzerland, returned to the BrandZ™ Insurance Top 10, as operating profits rose, in part because of an aggressive effort to streamline the business.
Brand-Building Action Points
1. Meet the future
Build awareness with prospective customers now entering the insurance market or expected to enter the market within the next few years. Millennials are reaching their household formation years. Consider how your core offer relates to their needs and how it can be best communicated.
2. Brand build your way
There are many brands-building options in the insurance category. Select the approach that best fits the brand and consumer expectations.
3. Be positive
Too often consumers think of insurers as the phone call they make when things go wrong. Turn that expectation around to help the customer live a healthier life or become a safer driver. In this renewed relationship, the brand will be in more regular contact with the customer, better able to anticipate and respond to the customer’s needs, and more sharply differentiated from the competition.
4. Anticipate change
Autonomous cars and the Internet of Things will both disrupt the demand for insurance and insurance pricing, while also expanding the need for protecting personal data.
5. Preempt disruption
The InsurTech start-ups will nibble at the insurance business the way FinTech businesses have found profitable niches in banking. Develop or acquire the necessary technical expertise to preempt disruption.