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The Voice of The Personal Lines Insurance Consumer

Insights from a Deloitte Survey of Auto & Homeowners Policyholders:Buyers in the Driver’s Seat

Sam Friedman, Insurance Leader, Deloitte Research

Copyright © 2011 Deloitte Development LLC. All rights reserved.2

Why do these surveys and why now?

– Auto and homeowners insurers are eager to find organic growth opportunities in a very competitive market.

– Carriers challenged to effectively reach a new generation of consumers who are increasingly seeking multi-channel and multi-platform sales and service options.

– Intelligence on buyer motivations and preferences can help insurers refine marketing and distribution strategies.


Whom did we query and how?

• Deloitte survey participants were solicited from pre-screened online respondent panels over the summer of 2011.

• Two separate respondent panels were assembled—about 1,100 each—among buyers of homeowners and auto insurance.

• Each survey panel included statistically significant segment sizes within four “core” demographic attributes: age, education, household income and family status to provide a representative cross-section of the population.

• See the Appendix for a detailed demographic breakdown.


• The homeowners respondents were more likely to have purchased their coverage through an agent, broker or some other intermediary. The auto survey respondents were fairly well split between those who used an agent and those who bought direct from a carrier.

• However, a deeper dive into the respondents’ awareness about how many carriers their agents represented revealed a significant degree of consumer ignorance on that point. (See next slide.)

How did personal lines respondents buy their insurance?

* Percentages for those that bought their current insurance adds to above 100%, as certain respondents have more than 1 insurer.


For those with agents, how many personal lines insurers did the buyer’s current agent represent?

* Percentages for those that bought their current insurance adds to above 100%, as certain respondents have more than 1 insurer.

• Among the two samples who bought via agents, 30% of auto respondents and 39% of homeowners did not know how many insurers their agent represented.

• Takeaway: This indicates that consumer loyalty to an agent likely goes beyond who the agent represents, or even whether the agent is independent or exclusive to one carrier, with respondents citing a number of value-added attributes that agents bring to the table.

Satisfaction Levels


Takeaway: Satisfaction levels with auto and homeowner policyholders ran fairly high, particularly among auto respondents. But the numbers of those who characterized themselves as “very satisfied” leaves a lot of room for improvement.

Insurers keeping the customers satisfied!


Respondents happy with their agents as wellTakeaway: High satisfaction levels among auto and homeowner policyholders

with their agents could make it difficult to convince these respondents to change channels and buy direct.

Channel Surfing


Takeaway: Those insurers looking to sell direct only may have a hard time convincing some people to drop their intermediaries, as a large percentage have been with their agency for over a decade, demonstrating that many buyers will insist on the personal touch and arguing for a multi-channel sales strategy.

Personal lines buyers stick with agents for the long term


Why use an independent agent?

What factors motivate buyers to do business with independent agents?

Diversity of Options

Trust

Price

Consultative Role

Advocacy/Leverage

Objectivity

Those respondents who use independent agents value having an intermediary providing multiple alternatives and a broader perspective, and feel most strongly about what an agent

can provide in terms of price, advice and service.


Are Personal Lines buyers open to changing channels?

• A significant percentage of consumers are not satisfied with the direct experience.• Agents appear to be better at creating a consistently positive buying experience.• Both sets of "channel changers" had the same demographic profile: Skewing older,

with lower income and less education.

Takeaways


• Takeaway: Those who buy their insurance through intermediaries generally won’t give up their agent without a substantial discount, and there is a hardcore group of consumers who apparently won’t buy auto or homeowners insurance without the help of an intermediary.

Money Talks: How much would it take to convince respondents to give up their agents?


• Cost and convenience were major considerations for respondents who bought direct.– Around 60% said intermediaries just add cost to the transaction.– About 2 out of 3 believe buying direct would get them a better price.– 3 out of 4 say it’s more convenient to buy direct.

• Trust is also a relevant factor.– 4 of 10 said they bought direct because they don’t trust agents to objectively represent

their interests. (The flip side of those who say they use agents because they don’t trust insurers to deal with them fairly. Either way, overcoming trust issues is a serious reputational challenge facing the industry.)

• Age makes a big difference.– Younger respondents appear more likely to buy direct, perhaps in part because of their

generation’s proclivity to live their social lives and conduct their business online.

Why do direct buyers prefer working without an agent?

The Fountain Of Youth


Age was the biggest single differentiator among survey respondents. Younger personal lines consumers were:• Least inclined to renew their current policies by about a 2-1 margin.• More likely to shop and change carriers.• More likely to buy direct from the insurer.• Less loyal to their agents, if they used one.• More convinced that agents could get them a better price.• More tech-friendly in terms of web-based services, mobile apps and social media.• Much less trustful of insurance companies.• More influenced by family and friends than by insurance professionals.• Lesson: Get ‘em while they’re young!

Can insurers bridge the generation gap?


Younger respondents more likely to go direct

• Younger consumers in both samples bought direct at a higher rate (6 in 10 among those under 35, compared to 4 in 10 for those 35 and older).

• Of those over 50, more than 1 in 3 in both samples said they would not buy personal lines insurance without an agent, compared to fewer than 1 in 5 for those 34-50, only 1 in 10 for those 26–34, and 15% of those under 26.

• Of those over 50, 59% are very satisfied with their current auto agent, but that drops to 43% for those 26-34 and to 31% for those under 26.

• Among homeowners, 46% of those over 50 are very satisfied with their agent, dropping to 31% for those 26-34 and 25% for those under 26.


How can insurers attract the young and the restless?

Decision Points


• Price is still key, with 8 of 10 citing cost as Influential the last time they changed carriers, although far fewer said it would be influential in their next purchase decision.• Amount & type of coverage a clear second.• Claims handling critical—1 in 3 changed carriersafter a bad claims experience.• Many would be swayed by multi-policy discounts.• Brand, reputation and trust were key factors.• 4 in 10 would be influenced by an affiliation between their bank and their insurer.• 1 in 4 said a recommendation from their auto dealer or real estate broker would be influential.

What motivates buyers to change carriers?


Telematics: Only if the price is right

• One-third of respondents would agree to install such a device without any guarantee of a discount, but 42% would require an immediate discount (see above).

• Auto insurers will have to sweeten the pot up front to convince many policyholders to try the new tracking system, which in theory would reward those with the safest records.

• There is a generation gap here as well, but in this instance it is older drivers who would be more open to telematic monitoring, not younger policyholders.

Takeaways


*Figures are for respondents who have switched insurers in the past. The base is 591 respondents for Homeowners and 754 respondents for Auto.

The more policies the merrier

• Multi-line insurers have an opportunity to cross-sell their products, particularly in marketing auto coverage to homeowners, who place a much higher value on multi-policy discounts than among auto insureds.

• This makes sense because homeowners most likely own a car as well, while not all drivers necessarily own a home.

Takeaways


What Web Services Do Respondents Want Most?

Tier 1

• Among the most important web services (cited by nearly 3 of 4 respondents) were checking on the status of a claim, information about products and coverage, and price quotes.

Tier 2

• The next tier of responses (cited by about 2 of 3) were for renewing a policy, updating account information, locating an insurer-approved repair facility, paying your bill, contacting your agent or finding one nearby, and submitting a claim.

Tier 3

• Services cited by the third tier (more than half) of respondents were insurance card access and policy information, cancelling a policy, and getting information on coverage besides auto.

Tier 4

• Among the web capabilities cited as important by fewer than half the respondents were the ability to share accident or claims experiences with other policyholders, view safety and maintenance videos, clarify coverage or claims questions in an online chat, and having a mobile smartphone friendly website.


Takeaways:

Three out of four survey respondents don’t even know whether their insurer offers mobile applications. But those who do find them very useful—younger buyers in particular like them.

Mobile Not Yet On The Radar (But those respondents who have them, like them)


• Only 1 in 5 surveyed said their auto insurer provides information over social media.– Of those who do get auto information that way, 1 in 5 said such information is not at

all useful.

• But 1 in 4 found such information very useful and 13% found it extremely useful. – Age once again is a significant factor here with the youngest two segments much more

positive about the value of information provided over social media by insurers.

Social media also in its infancy

Growth Strategies To Consider


• Build brand loyalty with target customers while they are young.

• Containing costs matters with product becoming increasingly commoditized.

• Multi-channel sales and service is becoming table stakes for large, national players.

• Invest in ability to engage with customers virtually (e.g., web, mobile and social media) for both sales and service.

• Buying direct is not for everyone. Agents will continue to play a major role and stand out for their ability to generate loyalty.

• Between 20% and 40% of consumers (depending on line of business and current channel) are flexible in terms of their channel preferences.

What are the implications for insurer growth strategies?


Strategies for Direct-Only Organizations

Advantages• Lower cost structure• Natural appeal to younger, online-savvy consumers• Flexible to more rapidly adapt to consumer feedback

Challenges• Retaining price-sensitive consumers• Retaining consumers as their coverage needs become more complex• Avoiding commoditization

Potential Growth Strategies

• Build brand awareness and credibility on their social media platforms• Strengthen ability to provide advice for those customers who need it• Strengthen loyalty by offering more products, a strong service experience

and value-added services


Strategies for Multi-Channel Organizations

Advantages• Ability to appeal to customers regardless of their channel preference• Tailoring product/channel/service mix to target customer segments• Retaining customers as their need for advice and coverage evolves over time

Challenges

• Building an effective and efficient multi-channel model• Effectively transitioning consumers to high-touch channels as their needs

become more complex• Tailoring product/channel/service mix to target customer segments


• Develop a differentiated sales and service experience across channels• Strengthen pricing sophistication• Tailor product portfolio to appeal to target segments


Strategies for Agent-Only Organizations

Advantages• Superior ability to build trust and loyalty, leading to better retention• Ability to offer a diverse product portfolio• Ability to deliver a differentiated service experience

Challenges• Customer’s loyalty to the agent versus the insurer• Higher cost model; channel productivity (exclusive)• Ability to consistently deliver the brand promise (independent)


• Focus on industry leading retention of existing customers• Target direct consumers who want and need more advice as their coverage

needs become more complex• Consider offering telematics-based products to price-sensitive consumers

Appendix


Homeowners had higher household income than auto policyholders surveyed.

Personal Lines Insurance: Whom did we survey?

Source: Voice of the Personal Lines Insurance Consumer Surveys, Deloitte Research, June/July 2011

Age

18-25

26-34

35-50

51-64

65+

Below $25K

$50K-$75K

$75K-$125K

$125K-$250K

Over $250K

$25K-$50K

Household Income

Auto Homeowners Auto Homeowners


Personal Lines Insurance: Whom did we survey?

Source: Voice of the Personal Lines Insurance Consumer Surveys, Deloitte Research, June/July 2011

Homeowners were more likely to be married than auto policyholders.

Education

Less than four-year college

Four-year college

Post-graduate

Family Status

Dependents

No Dependents

Married/Committed

Single

Widowed/Separated

Auto Homeowners Auto Homeowners


Sam FriedmanInsurance LeaderDeloitte Research+1 212 436 [email protected]

Contact

mailto:[email protected]

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