Hybrid channels more likely to generate product recommendations
Malaysian consumers were more likely to recommend insurance products after exposure to hybrid channels, rather than digital platforms alone, according to a report by consulting firm Bain & Co. Of the Malaysian surveyed, 60% agreed that they value services beyond insurance protection, and would like to see insurance companies branch into areas such as health monitoring, fitness planning and legal advice. Although data confirming the efficacy of customer reward programmes is inconclusive, the co-author of the report speculated that the higher customer engagement they encourage most likely lead to higher retention.

This article first appeared in The Edge Malaysia Weekly, on October 3 - 9, 2016.





Malaysians are increasingly embracing digital channels for their insurance needs. There has been 60% growth of digitally active consumers in the property and casualty (P&C) and life insurance segments in the past two years, according to management consulting firm Bain & Co.

It says in its biennial report, Customer Behaviour and Loyalty Insurance: Creating Opportunities Beyond Basic Coverage, which was released on Sept 22, that this is a significant jump from 38% in 2014.

Harshveer Singh, a partner at Bain’s financial services practice in Southeast Asia and co-author of the report, tells Personal Wealth in a phone interview that the strong growth signals that more insurers in the country have managed to deliver the digital experience to its consumers.

“It is quite a high growth rate. In fact, Malaysia has experienced a slightly bigger jump than Singapore in the past two years. We do observe that countries seem to embrace digital in waves, catching up in a very short period of time rather than developing at a steady pace. This seems to be driven not only by consumer demand but also by what providers offer in the market,” he says.

The report says with the emergence of fintech platforms and online aggregators, the competition between these firms and traditional insurers has now intensified. Direct interactions with providers via digital channels are now possible, leading consumers to expect easy, fast and convenient internet and mobile applications.

Despite this, insurers cannot afford to lose their “human touch” when interacting with consumers. Harshveer says digital channels are only complementing, and not completely replacing, the other channels. “We have been doing the research for a couple of years now across multiple countries, and each country believes the importance of human interaction has not diminished.

“We found that the net promoter score (willingness of customers to promote products to others) for consumers of hybrid channels — that is, digital and physical human interaction — is much better than a consumer who only interacts digitally. A consumer who only interacts with an algorithm that only provides automated recommendations, for example, will not have as fulfilling an experience as having both the algorithm and adviser at the same time to interpret the recommendations.”

With the rapid technological advancements, insurance providers are looking to participate in this space. Harshveer says collaborations between insurance and technology players are already taking place and those who have not done so should figure out the best way to participate.

“For example, AIA Hong Kong and US-based MetLife have announced that they are joining a private financial blockchain consortium led by New York-based start-up R3 in an effort to explore the potential application of blockchain technology in the insurance industry,” he adds.

Recently, insurance providers Sun Life Financial and Aviva announced a partnership with Silicon Valley-based venture capital firm Plug and Play Tech Center to explore, recognise and support the development of potential innovations in the insurance industry.

Going forward, the global insurance industry is likely to experience profound changes driven by the Internet of Things (IoT). In the US, IoT’s real-time data collection and sharing power is set to create significant, new opportunities in finer product segmentation, improve loss control and accelerate premium growth.

Harshveer says with the right regulatory nudge, Malaysia has the chance to experience the same transformation as well. “Today, you can already see this in Singapore, where insurers are offering two kinds of plans for the model — with the telematics devices installed and uninstalled. The experimentation has already begun and P&C is typically the first industry segment to start. The question is, when will it reach Malaysia? That is the crystal ball question. It is very hard to predict, but it will surely come.”

CONSUMERS WANT ADDITIONAL SERVICES

More than half (60%) the Malaysians surveyed say they would value a platform that provides services that go beyond insurance protection, creating an opportunity for P&C and life insurers to generate additional sales. These new opportunities may include ancillary services such as health monitoring, fitness planning and legal advice.

Some insurance providers, such as Metromile and Discovery, even offer anti-theft services, where consumers are alerted if the telematics box that has been installed in their car has been removed. AXA Germany, on the other hand, uses a third-party automation system to monitor floods and minimise damage.

“One of the value-added services in Singapore that consumers love is getting advice on retirement and hospitalisation. This would apply to consumers in Malaysia as well,” says Harshveer.

The report also says more than 80% of Malaysian consumers are willing to share their financial, health and other personal data to gain access to these additional offerings. This signals consumers’ trust in their insurance providers, thereby opening the door for these insurers to build a stronger relationship with consumers.

Harshveer says there is enormous potential for insurers in Malaysia to benefit from having reliable consumer data. “This allows pricing to be a lot more flexible, especially with the detariffication of auto insurance. Individual data can help insurers give a more tailored quotation as they are able to leverage this to implement better price segmentation. With the information being voluntarily shared, as long as the insurers respect the confidentiality agreement, there is a huge potential for them to reap the benefits of consumer data.”

He cites two insurers that have put this into practice. One is US-based financial services provider USAA, which uses consumer data to implement targeted marketing triggered by life events such as offering additional auto insurance to a family when a child turns 16. Meanwhile, UK insurer Admiral uses consumer data to offer an insurance policy that covers all the members of the immediate family even if they do not reside in the same city.

Due to macroeconomic and regulatory forces, insurers are beginning to realise the importance of consumer loyalty and advocacy to achieve substantial long-term benefits. To increase consumer loyalty, insurers could offer multichannel interactions, ask for consumers’ feedback at the end of each interaction and invest in the right space, says Harshveer.

“The touchpoint (point of contact between a buyer and a seller) is usually the underinvested part of the organisation. Insurers need to rethink this and try to offer better technology at the front end and understand what consumers are happy or unhappy about. It may sound simple, but it is actually very important in increasing consumer loyalty,” he adds.

In an effort to increase retention and consumer loyalty, some insurance providers such as AIA and Manulife have implemented programmes that give consumers rewards in exchange for living a healthy lifestyle. Through the AIA Vitality programme available in Malaysia, consumers are offered rewards in the form of discounts for air tickets, healthy foods and sports apparel. The ManulifeMOVE programme in Philippines and Hong Kong offers a special rate for consumers’ premiums.

Although the concept is appealing, Harshveer says the researchers have not been able to measure whether the effort has translated into higher sales and consumer take-up.

“It is a very new concept. We do not have sufficient data yet to determine the impact. But our prediction is that since it involves more engagement with consumers, it would have meant more consumer advocacy, which leads to higher retention.”

Bain & Co partnered with online global market research firm Research Now to conduct the study, which involved 164,421 consumers in 19 countries, including Brazil, China, Germany, Indonesia, Japan, Malaysia, Mexico and Poland.

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