Almost half (48 per cent) of UK consumers would look at cutting costs by eliminating non-mandatory insurance coverage, according to a survey commissioned by insurance software developer Guidewire.
The survey also found that travel insurance was the type of coverage identified by respondents as most likely to be dropped, with almost one in five (18 per cent) of respondents identifying this insurance type as ‘likely’ to be cut. The next most popular insurance types targeted for cuts were home contents (17 per cent) and bicycle insurance (16 per cent).
This sentiment reflects the increasingly poor economic outlook of both the UK and the global economy as a whole – 86 per cent of respondents to the survey said that they were concerned about the ongoing cost-of-living crisis.
The survey also found that many customers still have a negative opinion of insurers, viewing them as inconvenient, arcane, and prone to selling expensive products.
More than a third (36 per cent) of respondents said that they felt insurers were ‘necessary but inconvenient, while a quarter saying that they felt that they sold ‘overpriced products and are reluctant to pay out a claim’.
Guidewire highlighted that the second claim was especially concerning given that most people surveyed (88 per cent) had not had to make a claim in the past year. This was compounded by the fact that over a quarter of those surveyed said that their ‘opinion of insurers was negative, and has not changed in the past 12 months’ – suggesting that negative views of insurers were becoming embedded in the public consciousness, with the potential to ‘undermine the good work the industry does for its customers’.
Guidewire recommended that ‘insurers need to be careful that the news headlines and hearsay during the Covid-19 pandemic do not become entrenched views of the industry’.
The survey was carried out by market researcher Censuswide, and which consulted 1,000 UK insurance customers between the ages of 18 and 55 in May 2022, and is part of Guidewire’s annual Europe, Middle East and Africa (EMEA) Insurance Consumer Survey. Guidewire has also commissioned simultaneous, parallel reports for the French, German and Spanish markets – however these results have not yet been released.
Insurers are ‘struggling to demonstrate value’
In response to the findings, René Schoenauer, Director of EMEA Product Marketing at Guidewire, said: “The combination of people’s finances being squeezed and their opinions of insurers being low threatens to widen the insurance gap in ways that could make consumers far more open to harm. It appears that insurers are struggling to demonstrate the value that they deliver to customers, and this is being shown in notions of insurers as inconvenient or unwilling to pay claims. Insurers need to consider how they can play a greater role in their customers’ lives to show them the importance of the products and services they provide and the benefit that customers derive from them.”
The company recommended that improvements to customer engagement could assuage people’s concerns about insurance providers – it highlighted that nearly four in ten people surveyed had ‘never spoken to their insurer’, pointing to what it called ‘highly transactional and limited relationships’ between business and customer.
Guidewire also warned traditional insurers that such an approach could leave them vulnerable to insurance industry newcomers, with 45 per cent of people surveyed saying that they would be comfortable purchasing an insurance from the likes of Amazon, Tesla or IKEA, and a further 30 per cent being impartial to the idea.
However, on a positive note, when customers did interact with their provider, it was found that almost half (49 per cent) believed that the customer service agents they spoke to had ‘all the necessary information required to help them’.
The survey also suggested there were opportunities for insurers to be more proactive in their customers’ lives, through risk prevention services. Six in 10 (61 per cent) of people said that they would welcome a service that ‘sent warnings about issues to prevent damage before it happened’.
“We have seen various major brands begin to offer embedded insurance products and this trend is going to carry on. Since consumers appear comfortable with the idea of buying from a consumer brand, even at this nascent stage, insurers need to start planning now for what kind of role they will play in this ecosystem economy. Do insurers fight to preserve their brand and invest in becoming more customer-centric to do so? Or do they choose to invest in technology that allows them to seamlessly integrate with these consumer brands and expand their book of business that way? There are no right or wrong answers here, but it does require commitment to a clear strategy either way,” added Schoenauer.