Is loyalty the icing on the cake?
/ loyalty // a strong feeling of support or allegiance /
There’s never a better time to test ones loyalty than annual renewal time for insurance, and timely too - with the FCA Report on Pricing Practices released in October 2019 that looks to address many of the practices we see in todays market. It’s UK focussed of course, but having travelled a lot, it is still one of the most, if not the most mature insurance markets. Many of these have evolved through the development of new technology and processing power. The FCA report was followed up quickly with a potential review on premium pricing, ultimately all leading back to where and how insurers actually make money. In most cases, they have responsibility to their shareholders.
The FCA report highlights that while switching is common place, and in the UK specifically supported by the large number of aggregators (while there are 4 or so primary ones, there are over 50), many folks don't switch and these are very specific groups. More over, the non-switchers turn out to be mostly classified as vulnerable customers. A quick search and you'll find plenty of stories on this - see the example below on how after 10 years with the same provider, prices for Diane went up and up and up. Doesn't seem right! Our focus primarily is getting people into the engine first, then keep them as long as possible.
Many folks are unable or uncomfortable in searching for a better deal, others are simply not interested in searching for a better deal if the price is within a reasonable tolerance of what you previously paid. A previous ruling by the FCA required that all personal insurance policies displayed last years price along with this years renewal price which I think has helped go a long way in helping people see the facts. For me this year, based on this info alone I could see that my renewal had gone up 61%, for a year with no claims or interaction at all to be fair. It's a tough position for insurers.
Gillian Guy, chief executive of Citizens Advice, said "it's great to see the FCA acknowledging that the insurance market isn't working", but this I'm afraid Gillian feels like a statement geared to generate headlines and news articles, not an actual reflection of what the Insurance Industry as a whole is doing. You already know, but you just need to look and see that many of the carriers show 95%+ of valid claims are paid each year, and some up to 99%. I’ve argued this point before.
Like many industries (it doesn't make it right or wrong) it's clearly not working as well as it should be for all, and thats the bit we should focus on and work out as an industry, how we can get better! Not declare the entire industry is broken!
Have we seen this story play out before?
Are we as an industry penalising loyalty? Intentionally or otherwise?
Are we in insurance headed the same way as utilities did in the UK? What I mean by this is price caps! There are so many similarities between Utilities and Insurance in my view. They are both:
Easy to switch (in the UK) usually via price comparison sites.
Price sensitive and highly competitive with lots of options to move around, easily
Typically have annual (or multi year) or monthly based contracts
Depends on a secondary market in many cases, price of oil vs price of risk capacity/reinsurance! - neither of which the average customer looks at or will understand or care about too much.
Has a strong purpose - Clean Energy and Purposeful investing/give back schemes (e.g. Lemonade) and so many more.
We can't live (easily) without either of them!. e.g you can’t power a car (petrol, diesel, or EV) or drive it without power or insurance!
There’s not a week that goes by that I don't see an article like this below- 'now is the time to switch energy supplier!' From fixed rates, to brand new deals. So similar to Insurance in so many ways. A quick look to OFWAT and you will see the pressure the regulator is putting on the sector for better customer services and more efficiency, with a former industry man himself raising the bar at the regulator, rejecting plans and making the industry resubmit more ambitious plans. We are holding ourselves to accout here.
So this all got me thinking. In fact, in my previous post - We have all the ingredients, but we just want cake! - I talked about how utilities and banking were two such financial services that many people had as little empathy or passion for, and were more interested in the Value Add Services they can actually engage with. But do these alone establish Loyalty?
So should insurance (or banking) be treated in the same way as our utilities?
Indeed, for many years our access to fast broadband has been lobbied that it should be treated as the same way as a utility, and this you could argue is all intrinsically linked. Without access to fast internet, using some of the price comparison switching sites and other tools out there makes access to switching inaccessible, therefore penalising folks without fast/easy access.
Assuming we have access, how do we address this?
If both of these industries are so price sensitive, hit them where it matters most - in the pocket!.
For this, I turn to cashback sites as a good example. For years, I have been using sites such as Quidco, KidStart and TopCashback (many others exist too) and I'm always amazed at how few people use these still, especially as the effort to do so is practically zero.
Checking my Quidco account, I have been a member since 2009 and in that time have earned over £3,000 for doing absolutely nothing different. It really is free money if there was such a thing!
Quidco - for me, one of the original sites - and actually the reason I started writing this. My usual Insurance renewal journey starts like this. Is yours any different?
Get renewal letter from existing insurer or email from Quidco with offers!
Quick refresh of quotes from the Price Comparison Website (PCW). How far off is it? Should I bother looking any further.
Check if I can get a better deal direct with their top 1, 2 or 3 listed or any of the direct players that don’t have specific brands on the comparison site.
Check if any good cash back deals from Quidco to leverage. Insurance is typically very good!
I’ve been with Quidco for years, and rarely to be honest check elsewhere as it just works well enough, but if you are really committed some sites offer different amounts to the same retailers and in some cases, one may feature on some cash back sites and not others, so worth looking! You can even get cash back from here before you go to the price comparison websites (at time of writing it was £32 cash back via here for one of them) as well as their own comparison capability too now.
It matters. If price is one of the key drivers for purchase still, then getting savings from here all add up. In the last email campaign I had from them, the cashback amounts ranged from £9 for a Motor policy to £999 for an ISA and everything in the middle - different providers, different amounts. To find out how the sites work, see here for a good explanation from Money Saving Expert.
Add to this if you purchase via a Cash Back Credit Card (The FinTech Favourite - Tandem with 0.5% cash back) means you start to make some tidy cumulative savings. This ventures into a whole different series of money savings and for that, go check out sites like Money Savings Expert who do this brilliantly. Furthermore, home admin sites with the like of Habiplace and OneDox are starting to make a big splash as I have previously mentioned. I think it's all coming together. I wonder who will own or acquire these platforms. Insurers, Banks, Utilities, Mobile providers? I think the opportunity for any of these folks to own consumers time and attention here is really interesting. Would I do any or all of these from a single orchestrated provider? Probably!
Back to Loyalty and Insurance.
So we know we can get cashback on my insurance policy, funny enough the same is true for my utilities, broadband, and to be fair practically anything. Going the above route in my mind creates loyalty to the cashback site, not the insurer specifically or any other retailer (unless you had loyalty to them / their brand in the first place). This has made me think about how other providers create loyalty?
Bulb Energy
Bulb, a new startup energy provider that has taken the UK by storm (or at least in my view!). In order to build loyalty, they have a ‘refer a friend’ scheme in which both customers get £50 towards their energy bills. (Sometimes it’s doubled to £100) I love what these guys are doing, it feels like (and sometimes looks like!) the Lemonade of Energy! The things that Bulb offers that resonate with me include:
The biggest Green energy - meets my own social purpose objectives
No lock in or contract, can change or leave without penalty at anytime (make it so good they can leave anytime, but don't want to!)
Great and easy to use modern experience, mobile first for me
Great customer service ratings (energy providers are notoriously bad at this) - these guys are #1.
And importantly, a referral scheme that’s simple and just works. So far, I have referred over 30 people and will continue to recommend folks, while they provide a great service and good price.
Ask yourself - how often do I switch energy provider?. I appreciate in some countries you don’t get this choice.
Peleton - Exercise
Peloton, the exercise bike (and in the USA Treadmill too) that also had a cult following of those looking to re-invent home fitness (remember the 7min workout!). Again, their referral scheme gives £100 of accessories to your referred friend and allows you to build up credits towards accessories and branded kit too.
This is slightly more niche again, given the cost of the bike in the first place, but again links back to me the locked in community feel here. Everyone’s a fan, the more people you bring in, the more folks save. Like Bulb, you can stop your subscription anytime, however in this instance you are still left with the bike so you could sell (I bought mine second hand) or if you are digital/app only that works too.
To put it into more perspective, the official Facebook group has almost 200,000 members with an activity stream so positive it’s mind blowing, with the UK community with over 2,300 people on it in the same manner.
Apple - My mobile & tech provider
Well I'm both locked into the ecosystem and a huge fan of the products, it just works all together, so I’m unlikely to change OR the cost of change would be (perceived?) too disruptive. These guys don't have the same pressure that Financial Services firms do when adding more products. Apple release something new and a whole host of folks just open up and say - Take My Money! (AirPods Pro anyone?)
I’m locked in - from HomeKit to AppleTV to Apple Music to FindMy and many other services. I’m 99% certain there are alternatives but the feeling I get using these services far outweighs any desire to leave or even try something else. I’m hooked.
Apple's shift to services and Financial Services is something else. A credit card with cashback, and 24 months 0% finance to buy a phone anyone?
Ask yourself - how often do I switch tech brands?
EE - Mobile Network Provider
Now this is maybe the odd one here, but I’ve been with EE for over 20 years, from the very first days of Orange, before they were acquired by EE. My loyalty here is driven by a view (rightly or wrongly) that 1) originally it was too hard to keep my phone number (the regulator!! fixed that a while back), 2) that the network service is as good as any of the other ones and 3) my tenure must mean something (although at renewal it doesn’t always feel that way through their standard process, until I speak to someone).
Whilst I hold out for #3, the reality is the inconvenience of changing for no perceived benefit is zero to me. All I care about is what phone I have (see Apple above) and can I make and receive calls easily. On the latter, this will be the primary reason to move if if do. It seems as Digitial services get better, the basics of being able to make a call are falling short, so this would question my loyalty. It would just need to be better.
Ask yourself - how often do I switch mobile phone network provider?
The common theme here seems to be communities. Is there where mutuals make a come back? Or InsurTech’s such as Bought by Many (pets) or Laka (Cycling) get an edge. Motivated folks passionate about something in common, and makes them feel good. Both providers offer a financial reward for bringing on more customers.
Is this just a better way of reducing customer acquisition cost (CAC)?
Ultimately, both are cheaper than traditional CAC most insurers typically use, yet I have yet to see schemes from insurers as blatant and well published as this. Why? What's the difference?
As an aside, yet highly related - there was a really good thread on Twitter from Lenny Rachitsky, a former AirBnB employee which I really enjoyed. See here for the full thread, but the two things that stood out for me were how you manage perceptions on both sides. For AirBnB it was both the visitor and the host.
So what happened to my (Insurance) loyalty this year?
On receiving my renewal notice, I noticed as above it has gone up 61% on last year, with a clear explanation that I'm no longer entitled to the 40% new customer discount. Thats fair, although, with no claims, no contact throughout the year - there was no attempt it appears to keep me! And with a 61% hike, I’m not sure they expected me to stay. You can see why we have the articles highlighting Diane’s case above now and the issue from the FCA. I did what most people do!
So back to the aggregators, my best quote from a comparison site, it turned out that I can get a quote at just ~5% more expensive than this years premium, but when I get my cashback, is actually the same as last year for less than 5-10 mins work, saving hundreds of pounds in my case.
Some insurers are indeed embracing it with open arms, this is a great example from a quote page clearly acknowledging how I got to their site from HomeProtect. (Actual numbers are examples only up, don't worry!)
Would this loyalty have changed if I had a claim, either positive or negative. From memory, those with a claim and a solid experience in dealing with it, get people to stay longer.
The reason for sharing this was started off by a Quidco email and wanted to test what generated loyalty in my everyday life?
So who are we actually loyal to?
My cashback site - YES, it’s pretty much a given I will check here. Maybe I’m not normal! But replace cashback site for brokers or agents, and would the same be true?
My insurance provider - NO. I don’t think, I don’t really interact with them, per this year - but I do have a brand affinity to folks I trust. This I put down to occupational hazard.
My energy provider - MAYBE. I really like Bulb and the experience they have created. I have a strange affinity to them that I can't quite explain. Maybe it's a combination of the ease of use and purpose? Maybe why Lemonade do so well with their give back too?
I'm also thinking, why didn't the Insurer just make it that much cheaper in the first place and cut everyone else out? My assumption is they keep all channels and options open for where and how people chose to shop and get to the site ultimately, maximising profitability.
Do we just love a deal! and the sense of finding one?
I also challenged myself on why I hadn’t yet used one of the auto switching services that I wrote about previously. In this instance, it feels like a) I don’t know them well enough yet and b) I would lose too much control over who I end up with (especially as I like to write about this), however in chatting to a colleague, he doesn't really care who he is with and is 100% in - so it's clearly working for folks! I need to dig into this, I still believe they have a major place going forward. Maybe I care about the provider and brand too much still whereas others do not? Maybe I’m just set in my ways! If I could say only switch to green energy providers with a customer service rating of 4.5 /5 or above?
This reminds me of a story I once heard at a conference in which a speaker said he spent 2 hours searching for a discount code, which would have saved him £10, when he could have easily afforded it in the first place and spent the next two hours with his family instead. The feeling of getting a deal, for some outweighed the fact it cost 2 hours of his life. I often used to be guilty of this, but since this story have changed somewhat - I'm still always chasing a deal or discount. It must be in my genes!
What creates brand loyalty?
Ultimately, getting to brand loyalty and creating 'ravings fans' for insurance is no simple feat, especially in such a price sensitive market. I think there are many lessons to learn from some of the brands I’ve mentioned above.
Back to cake, for me it’s about bringing convenience and beautiful experiences to bear on me as a customer, moving beyond the product with either a value added service or purpose that matters that I can easily relate and associate with.
Theres a theme in all of the above. Create a community, lock them in with something they love, give them cash back, perceived or otherwise and keep delivery great services, products and experiences!
Over to you, are you loyal to your insurance company and if so, why, if not - why not? What would it take??
Nigel Walsh | @nigelwalsh