How is the cost-of-living crisis impacting the insurance sector?
Skyrocketing prices and steep utility bills have been dominating headlines since late 2022, with economic turbulence causing high levels of inflation across the vast majority of consumer goods and services, from groceries to mortgages.
Despite inflation appearing to slow in recent months, the cost of living crisis is still impacting many households.
The insurance sector is among the industries that have seen the impact of the cost of living. Over the past year, car insurance premiums, for example, have shot up with average prices rising by a record 40% when renewing or changing providers, compared to those purchasing policies in 2022.
Alongside this, a recent report by Debt Justice revealed that 12.8 million UK adults are falling behind on their bill payments, or find them a significant drain on their personal finances. Despite their importance, rising insurance costs only add to this stress for consumers.
How can insurers help by offering a better customer experience?
Customer experience is already a key priority for insurers, but providing customers with even more flexibility in the challenging conditions we're seeing. This support can help customers avoid falling behind on payments, prevent policy cancellations, and build trust with your customer base
It suffices to say that the car insurance market in the UK is saturated, with competition amongst providers further emphasised by customers typically using comparison sites to shop around for the best policies.
With this in mind, it’s crucial for insurers to maximise engagement with interested customers and secure their strong lead conversions. By focusing on customer engagement and prioritising user experience at the point of purchase, policy providers can strengthen their success rate and land new clients.
Two-thirds of motor insurance policies are now obtained online, and this number continues to grow year on year. Buying insurance digitally has improved accessibility dramatically - allowing customers to shop without having to travel, wait in long call queues, or manage the processing of physical forms. However, this transition comes as a double-edged sword.
With more of the insurance market shifting its focus to online, insurers must ensure that their digital offering is fit for purpose and meets the standards today's consumers have come to expect. The most direct way to reach these standards is through the simplification of insurer’s online offerings
Due to rising standards in online shopping experiences, expectations around digital payments dictate that ease and simplicity are highly important factors for consumers - no matter the sector.
Forcing customers to open new tabs or handle pop-up windows when completing a purchase is frustrating, even for more tech-savvy customers.
By integrating the payment process with your website, customers don’t have to leave the site to complete the payment.
A system with a lot of payment steps and click points along the customer journey adds friction to the process and can lead to cart abandonment.
On top of this, being directed to an unfamiliar page can make those who are more cautious of online payments uncomfortable, and reluctant to hand over their card details. By keeping the whole process under one roof from start to finish, insurers can help reassure customers.
Every customer's financial situation is different, so using a versatile payment system means a wide scope of different payment methods can be offered to best suit the individual.
It may seem counterintuitive, but facilitating more flexible and diverse means of payment can simplify the whole process, and ensure a successful transaction.
Can insurers be more flexible?
Today people are more connected to their finances than ever before. Online and mobile banking means that consumers can weave financial management into their everyday lives, as and when required. Why then shouldn’t managing necessary expenses, such as car insurance bills fall under the same remit?
Since their inception in 1964, direct debits have been a significant part of the UK public’s budgeting, allowing consumers and businesses to predict and better manage their spending and income.
Without flexibility, however, direct debits can come as an inconvenience, meaning customers are controlled by their outgoing payments, instead of the other way around.
Allowing policyholders something as simple as selecting a withdrawal date for direct debits allows them to set up a bespoke plan to synchronise their payments with their own financial rhythm.
By doing this, insurance providers can better work alongside policyholders to ensure they can pay on time - improving cash flow and saving staff time from chasing missed invoices.
How important is it to nurture strong customer relationships?
Missed payments do happen, and as costs continue to remain high across all outgoings, many people will continue to find it hard to keep up.
When payments do fall behind, it presents a critical time to build a strong and trusting relationship with policyholders and get them back on track.
Automated payment reminders, sent at a set time before the direct debit is due to go out, help keep policyholders in the loop, and ensure their scheduled payments are front of mind around ‘due day’.
By clearly setting out the amount that will be taken, the exact date of payment, and a way to get in touch with support staff should extra help be required, consumers are assured that the provider is keen to work with them toward easy policy maintenance and simplified administration.
Most people rely heavily on their cars to get around for everyday necessities and work, so it is important for insurance providers to remember that a high proportion of missed payments cases will come from people who can’t pay, rather than don’t want to.
Well-managed insurance costs are better for both parties, policyholders and providers, - and it goes a long way towards policyholder retention for insurers to work hard to keep their customers protected by insurance and on the roads during these tough financial times.
Please also take a look at our upcoming virtual event, InsurTech LIVE, coming on 18th-19th October 2023.
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