To achieve long-term success, insurance must be responsive to changes in consumer behavior. People are now using social media and smart phones to help them make choices. Instead of trying to force consumers to use a particular channel, insurers should offer multiple networks for doing business.This finding was unveiled by Christian Bieck, research director at the IBM Institute for Business Value. Based in Germany, Mr. Bieck visited Toronto in mid-December to present the results of a study of 10,000 respondents, comprising over 8592 consumers and 1360 insurance intermediaries in 17 countries, including Canada.

Interviewed by The Insurance and Investment Journal, Mr. Bieck affirms that the consumer is becoming “multilevel.” “For any type of product, when a consumer wants to make a purchase, they often start their search on the Internet. They go to the store later. A shop recommended by a friend on Facebook would have more appeal. The same phenomenon is taking shape in insurance,” he says.

Insurers should therefore simplify shopping for customers, Mr. Bieck adds. “People shouldn’t have to repeat the same message several times to be understood.”

Insurers still focusing on intermediaries

Intermediaries such as brokers, agents and advisors also need to do their part. “Insurers are still focusing on the intermediary network. That’s OK because it is still the network in which people trust the most. But insurers need to understand that not all their customers want to do business the same way,” Mr. Bieck points out.

Insurers need to change, notably by putting more emphasis on relations. They should try to capitalize on the relation of trust they have built with the customer. “If they want to become multichannel, they must nurture this relation with the customer, because consumers want to do business in their preferred way. This is the very nature of the way people interact, be it to do banking transactions or buy electronics. When you do business with an intermediary, usually it happens in the office, face to face. Insurers should be open to other types of communication and be present in all channels. This also applies to market intermediaries,” he says.

Mr. Bieck sees this trend as not a revolution but rather an evolution in approaches. “When the Internet came along, everyone said it would kill everything we were doing at the time. That didn’t happen. Instead, it made us evolve in the way we do business. This is why the arrival of social media and smart phones is not a revolution but actually an evolution. The emergence of any new technology will follow this pattern. The challenge for insurers is to be able to offer customer support for all these inventions. That’s what you can call a revolution,” he explains.

Are some markets the frontrunners in social connectivity? The United States comes immediately to mind, particularly with all the initiatives launched by players such as Geico, Progressive, USAA and Nationwide. Mr. Bieck points out that some European players excel at applying the multinetwork approach, to serve customers better. It lets their clientele freely choose the way they want to do business.

Canada is distinct

The Canadian market has several distinctions, Mr. Bieck continues. One is related to brokers, agents and advisors. When IBM asked them what they value most when they do business with an insurer, the dominant answer in most countries is the insurer’s process efficiency. Not in Canada. Canadian intermediaries who participated in the study claimed that the most important thing for them was the commission rate.

IBM also measured the consumers’ rate of confidence in the insurance industry. Worldwide, 44% of people said they have confidence in the industry. The other 56% said they do not. In Canada, fewer people trust the industry, at 41%, which means that 59% of respondents lack confidence in the industry.

Another trend the study noted concerns age groups. Young consumers prefer to do business directly with the insurer rather than deal with an intermediary. They tend to search directly on the insurer’s website instead of using an aggregator.

“For the consumer, it is important that all of an insurer’s networks are integrated. This seems to increase loyalty and encourage customers to remain with the insurer from whom they first bought a product. If you force them into a particular channel, they may opt to look elsewhere. Insurers must therefore let consumers choose their channel. It will be hard for them because they are indeed used to being in control,” Mr. Bieck says.