Insurance consumer survey reveals changing preferences

Insurance consumer survey: Respondents favor the familiar—but is that the end of the story?

Personal lines insurers in the United States have their work cut out for them in differentiating a market dominated by traditional, price-driven, commoditized products. But innovation creates opportunity and may yet lead to disruption down the road, a Deloitte insurance consumer survey has revealed.

When queried about the types of auto, home, and renters’ insurance concepts they’d prefer, the policy features they desire, and their willingness to share information, most of the survey’s 1,000 respondents were conservative, opting to stick with the basic, standard policies already familiar to them.

The consumer insurance survey also showed that the vast majority had not switched carriers very often, if at all. Only 36% had changed auto insurers in the prior three years (compared with 73% of respondents in the United Kingdom), while 20% had not switched in over 10 years and 19% had never changed carriers. Among homeowners, only 30% of US respondents had switched in the prior three years (compared with 65% in the United Kingdom), while 29% in the United States had never changed insurers.

Part of the reason for such high retention rates might be that 56% of US respondents bundled their auto and residential coverages—far higher than in any other country surveyed except Canada—making it more challenging for carriers to compete for just one of the paired policies at renewal and discouraging customers from splitting their personal lines coverage.

Breaking down the silos for innovative insurance products

The consumer insurance survey also showed there is still likely room for innovation, even in standard policies, as many respondents indicated interest in capability upgrades empowering them to adjust price and coverage, reflecting changing needs and usage. In addition, a significant proportion appeared open to far less traditional coverage concepts.

The survey also documented an ongoing transition to a new generation of personal lines buyers more likely to opt for virtual interactions, do-it-yourself applications, and alternative coverage models.

Indeed, a wide range of respondents showed interest in a more comprehensive approach to their personal insurance needs that breaks down the traditional silos of standard auto and homeowners’ policies. Such a transition might also more effectively address respondent preferences for greater simplicity and flexibility.

Turning market disruption into a win

The consumer insurance survey data indicates that personal lines insurers may have a hard time getting beyond pure price competition, whether in retaining customers or expanding market share. However, the survey did spotlight areas where carriers can improve their competitive position with incremental upgrades to standard policies, as well as with more fundamental shifts in design, distribution, and customer engagement.

To start, insurers likely need to offer customers of all ages more control and additional options to alter coverage and price—for some, not just at renewal, but during the policy year. Many auto and homeowners’ policies already have some flexibility built in—the ability to add coverage for newly acquired valuables or additional drivers, for example. Yet greater adjustability may be called for at a time when more people are working from home, driving less frequently, and more often using their personal property (car or residence) for commercial purposes in the sharing economy.

This option may be especially compelling given how open many respondents appeared to be to a wider-ranging relationship with personal insurers. This might give the industry room to innovate not only in addressing a more diverse set of emerging risks in the sharing and digital economies, but also in creating opportunities to move competition beyond pure price concerns to encompass broader service options as well.

How far might such flexibility go? Can insurers really offer “freedom-to-move” policies that would cover the policyholder no matter what type of vehicle they use? The actuarial and underwriting challenge might be considerable, yet a policy that automatically adjusts coverage and price depending on how customers travel at any given moment may be worth testing—especially since the option was well received across all age groups. Urban dwellers, who are frequently getting around with bikes, scooters, rideshares, and other motorized and muscle-driven vehicles they either own or rent for brief periods, could be prime targets.

The digital natives are restless: Get innovative insurance products ready now

The need to innovate will likely be particularly important to appeal to younger prospects, who are digital natives and seemed more open to alternative concepts. While basic and standard coverage produced the highest preference index for younger and older respondents alike, the youngest (under age 34) came in far lower (around 160 for both auto and home) than those over 55 (239 for auto and a whopping 276 for home).*

Meanwhile, personal lines carriers are being challenged to adapt to a market where product lines are blurring between personal and commercial coverage. More auto and homeowners’ carriers will likely have to start incorporating simple switchovers to commercial coverage if a policyholder uses their car or residence for business purposes. Of those surveyed, 29% indicated a desire for such an option with their cars, along with 25% who said they’d like the ability to switch to a different coverage when they use their home as a workplace—an attractive option these days given the number of individuals working from home due to the COVID-19 pandemic.

Given evolving consumer preferences among respondents for simplicity and convenience, some insurers may want to consider differentiating in an increasingly commoditized, price-driven market by transitioning to a more holistic, relationship-based strategy.