Of Special Interest

Filters

[x] [x]

2nd November 2011

Social Media to inpact insurance market says report

Social media is set to play a transformational role in insurance over the next five years, but firms are reluctant to invest in the channel, according to the “Future of General Insurance” report from Marketforce Business Media.

Launched at the company’s 11th annual Future of General Insurance conference, the report sheds light on a number of the key issues affecting the insurance sector’s future based on a survey of over 200 insurers and brokers as well as in-depth interviews with a range of insurance industry leaders.
With significant implications for distribution across most insurance lines, 8 out of 10 of the brokers and insurers surveyed anticipate most insurance buyers will consult social media or online reviews before taking out a new policy within the next five years.
Juliet Knight, Director at Marketforce, said
“Just as the success of aggregators has been the insurance distribution revolution of the last five years so our research indicates social media will the revolution of the next five.”
Perhaps surprisingly, belief in the growing importance of social media is even more prevalent within commercial insurance than it is in personal lines. A staggering 96% of commercial lines insurers and 93% of the London Market expect most of their clients will search for reviews or recommendations online by 2016. This compares with just over three quarters (77%) in personal lines.
Juliet Knight continues “There’s a growing consensus that insurers who successfully manage their reputations through social media will benefit significantly. In the future, social media could play a key role across in both commercial and personal lines insurance in aiding genuine, non-price-based differentiation.”
Paul Wishman, Group eCommerce Director at LV= added
“One thing is for sure, the days of insurers having a ‘one-way broadcast’– with full control of product/brand messages–are quickly disappearing, giving way to ‘marketing conversations’ with our customers. Those who listen and engage most effectively with their customer will increase the chances of success.”
However, despite their conviction in the importance social media will come to play, only half the insurers and brokers surveyed expect their own company to invest in social media as a sales channel within a two year timeframe.
Juliet Knight comments “By dragging their heels on investment, insurers are in danger of missing the boat. Non-financial brands are already snapping at their heels and if these new players are allowed to steal a march in their use of social media, their advancement across personal lines insurance will accelerate. There can be no room for hesitation.”
Marketforce’s research further reveals that in the claims sphere too the impact of social media will be strongly felt. 88% of the insurers and brokers surveyed foresee social media channels revolutionising communication during surge events.
David Williams, Claims and Underwriting director at Axa Commercial Lines, which is already using Twitter to raise awareness ahead of extreme weather events, said “Twitter is instant. Compare and contrast that with the old approach of changing a website, or worse still having to create and post printed material. The downside is that consumers will expect quicker service than they have had in the past, and insurers using Twitter and other immediate forms of communication will simply reinforce that. And when of course we get things wrong, we can expect the news to spread far more quickly and far more widely than ever before!”
The Marketforce report also reveals that 95% of personal lines insurers expect to see a significant increase in the market share of non-financial brands, such as Tesco, over the next two years. The research indicates, however, that it is the non-financial brands already active in the insurance space-rather than entirely new players-that are likely to win business from incumbents. Survey respondents were ambivalent about the potential for new market entrants, with less than half (49%), anticipating new players entering the market over the next two years. 90% expect further consolidation in the insurance market within the same timeframe.
Respondents were also questioned on the controversial topic of referral fees, which the Government has announced it intends to ban. Referral fees have often been blamed for increasing the cost of claims and wiping out margins in motor lines, yet barely one in three (29%) of those surveyed think that the banning of referral fees will make motor insurance profitable again, indicating the sector has deeper problems.
Juliet Knight explained
“Irrespective of whether referral fees have been instrumental in pushing up claims costs, there are those who argue that, if the ‘compensation culture’ remains entrenched, the ban could even put further upward pressure on motor premiums by depriving insurers of a revenue stream.”
On a more optimistic note for insurers’ profitably, 81% of the insurers and brokers surveyed expect a return to more accurate pricing for risk as result of increased capital adequacy requirements and falling investment returns. As matters stand, 84% across personal lines and London Market insurance, and 93% in commercial lines, feel that market factors play too great a role in pricing decisions at the expense of accurate risk-based calculations.