Royal Commission an opportunity for Life Insurers
The Hayne Royal Commission into Misconduct into the Financial Services Industries is set to deliver its report to the Government, and the Life Insurance industry will not be immune from its findings.
The insurance hearings raised a list of issues and concerns, and these were widely reported. They included problems with product design and disclosure, claims handling, aggressive selling and many conflicts of interest between providers and how they were servicing their customers.
The hearings clearly showed the extent to which some in the Life Insurance industry had betrayed community trust, with many providers in a state of cultural and ethical crisis.
From these dark revelations, however, can come some positives.
Public confidence in the Royal Commission is high, and there is an expectation that the process will lead to improvements in the Life Insurance industry.
Confidence in a positive change
Independent research commissioned by NobleOak in December 2018 found that a total of 72.3% of people surveyed, or more than seven in ten, had some level of confidence that the Commission would deliver positive change.
A total of 1,043 Australians aged between 30 and 60 were interviewed, some of them with Life Insurance and some without.
The 72.3% comprised 5.9% who said they were “very confident” in the Royal Commission, 16.4% who were “confident”, 19.5% who were “slightly confident” and 30.5% who were “somewhat confident.” A minority of 27.8% said they were “not confident at all.”
The research also shows that the Royal Commission is already changing the attitudes of Life Insurance consumers, with just over four in ten respondents saying it will change their purchasing behaviour.
The biggest change is the 23.9% of people who say they will “explore different insurers” and 4.0% who said they would definitely switch providers.
Previous research by NobleOak has identified the extent to which technology is changing the way people source and purchase Life Insurance, and the Royal Commission would seem to have accelerated this trend.
The use of the adviser channel has been under pressure from technology change for some years, and now it has been further eroded by a crisis of trust.
More than one third of respondents to the 2018 survey said their confidence in purchasing Life Insurance through advisers had been undermined.
The Royal Commission has unfolded in the context of an industry which is already changing rapidly due to technology.
The digital revolution
In NobleOak’s first research, in 2016, 10.6% of people said they had purchased either Life Insurance or Income Protection Insurance online or through a mobile device, and this has now increased to 16.3%, a 50% increase over three years.
Consumers are increasingly researching and comparing Life Insurance online, and the most influential information is coming from comparison websites and online reviews.
A combined 35.8% of respondents said customer reviews were either “extremely” or “very” important to them, and at the same time the power of advertising is waning. One-third of people said advertising was “not important at all” in influencing their Life Insurance decisions.
Life Insurance has never been an easy product to purchase, and while the old adage that it is “sold and not bought” may be broadly true, the dynamics of the marketplace are changing rapidly, driven by technology and issues of trust.
Today’s consumer is increasingly using digital tools and doing their own research on products. The perception of Life Insurance brands is driven not so much by advertising but by the direct experience of other people, now easily accessed online.
For Life Insurers, this presents challenges but also opportunities for differentiation, and trust will be a critical brand differentiator.
In 2018 and into the future, the most effective channel will be winning the trust of consumers to the point where they become advocates. This is the most powerful brand differentiation of all.