by Tony Vidler
In the life insurance area of financial services the answer is even tougher to find than usual, because insurance for virtually all consumers is an absolute grudge purchase. When we think about it logically every person who buys insurance (especially life or disability insurance) hopes that they are wasting their money…the last thing they want is a claim, isn’t it?
Simplistically it seems obvious enough that customers want money to turn up quickly and painlessly to help a surviving family or business adjust to the loss of a person or income. That’s the end result that customers are looking for of course, but the more vexing question at the front end of the process is what do customers want when trying to determine which insurer should be chosen?
The research that I have seen during recent years shows that there are common themes globally, regardless of cultural or geographic or demographic issues. The primary areas of concern for consumers are:
Each of these areas can be considered from two different perspectives: Product, and, People. That is, the key areas of concern apply to both.
Generally consumers want to be able to make good choices through comparison in order to determine relative value. An ongoing issue in life insurance is the difficulty for consumers to easily compare different options and products, despite the pricing and product comparators that have evolved in recent years. Comparing price of the products remains relatively meaningless if the consumer is unable to differentiate the products themselves from each other in terms of how they work, or might be expected to perform. Price comparison without the ability to compare features or benefits is therefore pretty meaningless really.
The terminology that the industry uses contributes to the lack of simplicity for consumers, but so too does the inability to explain in clear terms why a particular product might be superior or unique, or why the pricing is what it is.
This lack of simplicity and transparency in product undermines the general desire to establish a commercial relationship based upon trust, as the complexity actually generates distrust. The majority of consumers know full well that the life insurance is likely to be something which they hold for many years so establishing trust in the insurer and the product at the outset is a major factor.
So too is the expectation of loyalty from consumers according to the research. The customers expect largely to have some form of loyalty recognition built into the insurance-customer relationship that rewards the years of patient premium payment. This is an area where generally the product manufacturers perform pretty poorly.
The astute adviser who is ethically trying to convince clients of the merits of insurance should be mindful of the power in being able to convey the various product complexities in simple and easy to understand terms therefore. Incorporating complete transparency around costs, relative advantages and disadvantages of comparative products, and future options with the products is what will lead to trust in the advice.
There has been significant focus upon the “transparency” issues for advisers in recent years, largely as a result of evolving professionalism across the industry globally, supported by regulatory reform. Yet, the research suggests that consumers feel that the industry is not yet transparent enough. And that extends well beyond just the advisers these days. “People” includes those within the industry creating and pricing and dewlivering service upon products who are not advisers. There is a growing public perception that the institutions themselves are not transparent enough. Of course many on the distribution side of the fence (the advisers) actually agree with the consumer here.
Higher levels of transparency from all parties in the product design, implementation and servicing chain will assist with establishing higher levels of trust, but so too will greater simplicity in terminology and improved communications with the market at large as well as individual clients.
For all the technical excellence which has been created on the advice side of the industry, it seems apparent that consumers are not giving the industry a pass mark on simplicity. Or transparency. Or communications. And institutions generally do not appear to be winning ground on increasing loyalty from long-standing customers either. If anything customer loyalty is dissipating. That is dangerous for the distributors using the institutions to source product solutions, because rightly or wrongly the consumers lump both adviser and institution together as part of the entire service experience. If one party performs poorly it reflects upon the other party as well in the consumers eyes.
For any adviser or practice looking to create long term life insurance customer loyalty there are some opportunities to stand out from the crowd and become far more referable. Ensure there is a bit of distance in the customers mind between yourself and the institutions you use. Make sure the brands and and service offerings are clearly separated, and that the consumer understands the institution is literally just a product provider. Be constantly aware of the desire for consumers to compare and be reassured that the advice they have been given and the choices they have made are excellent ones. Invest in communicating frequently and service systems which reward loyal customers.
Do these things and there is a solid chance of delivering what customers wnat, and retaining them long term.