By Tim Spencer
Post Magazine recently reported on a recurring debate within the industry. Namely whether the recently announced ‘guarantee to beat’ initiatives are bringing value to consumers.
My understanding based on conversations with many figures in the industry is that it isn’t a sustainable model. But the catch 22 is that the aggregator sites aren’t going to go away anytime soon and as long as they’re around it is very difficult to differentiate on anything other than price.
Price may prove effective at bringing a new customer onboard, but if it is the only reason a customer chooses you then you’re hardly giving them a compelling reason to stay with you the following year.
So, in a price-conscious market how do you look to compete on value when there will always be a competitor ready to undercut you for short-term gain? In my view a lot of it comes down to enhancing the standard, quality and content of customer communications.
Can insurers compete on value rather than price?
In the long term rivals can only offer significantly cheaper premiums and remain profitable by severely restricting cover and service to levels customers are unlikely to be happy about. Therefore it is vital to be communicating to customers not only how much they will be charged but also the value of the cover and services they will receive in return for that investment.
In essence, breaking the cycle of acquiring new customers by offering them a cheap deal only for them to jump ship to a competitor offering an even better one the next means going beyond simply contacting them annually to present a renewal quote.
Insurers already hold vast amounts of data on their customers. Therefore with the appropriate analytics and systems in place there is a great opportunity to enter into more personalised dialogues with their customers that encourage more profitable lifetime relationships.
Do you think the price promise bandwagon is drawing to the end of the line? Or do you have other ideas about how the industry gets its currently thinking in terms of value rather than price? I’d be interested to know your thoughts via the comments.
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