Celent Says

Changing the Rules of Online Insurance

Nicolas Michellod
Insurance Experts' Forum, September 20, 2012

My colleagues Craig Beattie and Catherine Stagg-Macey published an interesting report back in April about the change in behavior of online shoppers when looking for car insurance policy online in the United Kingdom. The title of the report is "The Customer, Google, and UK Car Insurance: Lessons from Evolving Customer Search Behavior."

In summary, this study tells us that with the growing use of the Internet and aggregator websites when searching for the best car insurance products, online shoppers have become more educated and can now understand what a motor insurance product is all about. This self-education has allowed them to change their behaviour to look for tailored insurance products that not only better fit their needs, but also makes them less price-focused.

Celent has published various reports on the topic of online insurance. We have also advised insurance companies on this strategic subject. What we learn out of the U.K. history is that aggregators take control of the customer relationship as long as they are focused almost solely on price. Aggregators can therefore be dangerous for online insurers for two reasons. First, aggregators force insurers to squeeze their margins down in order to be in the top ranking and secondly many insurers tend to accept the price focus imposed by aggregators and sometimes neglect the service-to-consumer aspect, which is more important in the long run as it generates loyalty.

Even though we think that the past 10-year evolution of the U.K. online insurance market represents a useful benchmark for continental European insurers, we also believe there are differences that will always characterize specific markets. In France for instance, online insurance is less developed than in the U.K. right now. A handful of insurers are competing in this market but not more than 2 percent of new motor insurance sales are completed online. On the other hand, we see a growing use of the Internet by consumers gathering information before purchasing an insurance policy (the vast majority do this via traditional channels such as agents, brokers and banks).

What is interesting though is how the aggregator market is getting crowded in this country. Indeed, there are about 30 websites in France that compare motor insurance quotes online. In this jungle, it will be interesting to see how consumers will find their way. Maybe it would be interesting for insurance companies to launch a specific website comparing aggregators, using criteria like independence, trust, website usability, etc.

This being said, we can already predict than less than 10 aggregators will survive in the mid- to long-term in France. In the meantime—and unlike the U.K. market—there is an interesting strategic initiative, which I think deserves comment. In order to counter the growing importance of price aggregators in the French online insurance market, Axa has tried to differentiate by anticipating what Celent has discovered to be happening to customers behavior over time.

Axa has launched a website comparing services of insurers instead of price of motor insurance. The website is called www.quialemeilleurservice.com, (for our English-speaking readers, this means “who has the best service”) and in substance, it is a website comparing the level of services provided by insurers for different types of cases. For instance, if you are a young driver and would like to know who has the best service to replace your vehicle in case of accident you can get a ranking of insuers using this website. Iam curious to see how this strategic move from Axa can change the usual online insurance pattern. In the meantime, I think this website should be a first step toward allowing the French insurer to better understand customers and anticipate the critical moment when they’ll become educated enough to start looking for more tailored insurance products.

the customer behavior and preference data gathered will help Axa tailor the products that will be best placed to meet customer requirements in the future and http://www.quialemeilleurservice.com is an interesting an interesting example for other companies looking to achieve this goal.

This blog has been reprinted with permission from Celent.

Nicolas Michellod is a senior analyst in Celent's insurance practice, and can be reached at nmichellod@celent.com.

The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.

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