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After the shock - insurance in 2021 and beyond

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After the shock — Insurance in 2021 and beyond 4 Personal lines: Winning (and keeping) the digital-native customer Historically, personal lines insurers have competed almost exclusively on price. This is changing. There is a notable shift towards a customer-centric approach that does include presenting a competitive price but also goes far deeper, delivering an end-to- end digital experience that continually adds value to the customer's life using smart technology. Of course, price remains important to acquiring customers. In an immensely competitive market insurers will often discount new business quotes to unprofitable levels in order to acquire customers; margin is made on the inflated renewal prices. According to Consumer Intelligence 1 84% of UK motor customers shopped around for their insurance at renewal, with 53% staying with their existing brand. Interestingly, however, the same report finds that brands which increased price at renewal by a higher than average price rise achieved – counter-intuitively – a significantly higher level of renewal retention than those insurance brands that increased prices by less. Evidently, something more is at play here; whilst price is consistently named as the key determining factor for consumers when selecting an insurance partner 2,3 , it is not the only factor at play. Brand trust, customer experience, personal recommendations, online reviews and ease of purchase are also contributing to consumer buying behaviour. All of this is occurring in a consumer market that is evolving at unprecedented rate. Consumer confidence plummeted through 2020 and is likely to remain low for at least the next 12 months. Total UK consumer spending is expected to fall by a staggering £183.6 billion (14.9%) in 2020, according to a Mintel 4 report. Whilst overall spending is falling, online retail – which has been growing for a while – has expanded its footprint dramatically as retail stores were closed in line with various lockdowns across the globe. According to the Office for National Statistics 5 internet sales as a percentage of total retail sales in the UK soared to 36% in November 2020 compared to 20.2% at the start of the year. These online retailers are setting the customer expectations across all verticals; consumers do not segment their lives into different markets and form opinions on brands on an industry-specific basis, but rather expect all companies to match the very best customer experience they receive anywhere. This means easy online purchasing journeys, personalised experiences, integrated add-on services and rapid customer service response times are now expected by the customer. In order to win and retain customers, insurance brands are assessing their approach to personal lines insurance with the customer at the front of mind. 1 The virtuous circle: Customer retention in the general insurance market, Consumer Intelligence 2 The Digital Insurer: Accenture US Personal-Lines Insurance Consumer Survey, Accenture 3 UK Personal Lines Insurance: Distribution and Marketing 2019, GlobalData 4 Mintel British Lifestyle Report 5 https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi

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