Changing the rules in online insurance

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27 August 2012
Nicolas Michellod

My colleagues Craig Beattie and Catherine Stagg-Macey published an interesting report back in April about the change in behaviour of online shoppers when looking for car insurance policy online in the UK. The title of the report is The Customer, Google, and UK Car Insurance: Lessons from Evolving Customer Search Behavior. In summary this study tells us that with the growing use of internet and aggregator websites when searching for the best car insurance products, online shoppers have become more educated and understand now better what a motor insurance product is all about. This self-education has allowed them to change their behaviour to now look for tailored insurance products that not only better fit their needs but also makes them less price-focused.

Celent has published various reports on the online insurance topic. We have also advised insurance companies on this strategic subject. What we learn out of the UK history is that aggregators take control of the customer relationship as long as they are focused on price and almost solely on price. Aggregators can therefore be dangerous for online insurers for two reasons. Firstly aggregators force insurers to squeeze their margins down in order to be in the top ranking and secondly many insurers tend to accept the price focus imposed by aggregators and sometimes neglect the service-to-consumer aspect which in the long run makes them stick to the same insurance provider.

Even though we think that the past ten-year evolution of the UK online insurance market represents a useful benchmark for continental European insurers, we think there are differences that will always characterize specific markets. In France for instance, online insurance is less developed than in the UK right now. A handful of insurers are competing in this market but not more than 2% of new motor insurance sales are completed online. On the other hands we see a growing use of internet by consumers in order to gather information before purchasing an insurance policy (in the vast majority via traditional channels such as agents, brokers and banks). What is interesting though is how the aggregator market is getting crowded in this country. Indeed, there are about thirty websites in France that compare motor insurance quotes online! In this jungle, it will be interesting to see how consumers will find their way. Maybe it would be interesting for insurance companies to launch a specific website comparing aggregators... using some criterias like independence, trust, website usability, etc.

This being said, we can already predict than less than ten aggregators will survive in the mid to long-run in France. In the meantime and unlike in the UK market there is an interesting strategic initiative, which I think deserves a comment on this blog. In order to counter the growing importance of price aggregators in the French online insurance market, Axa has tried to differentiate by anticipating what Celent has discovered to be happening to customers behaviour over time in its UK report mentioned above. Indeed, Axa has launched a website comparing services of insurers instead of price of motor insurance. The website is called (for our English-speaking readers it means "who has the best service") and in substance it is a website comparing the level of services provided by insurers for different types of cases. For instance if you are a young driver and would like to know who has the best service to replace your vehicle in case of accident you can get a ranking of insuers using this website. I find the strategic move from Axa interesting and I am curious to see how it can change the usual online insurance pattern. In the meantime, I think this website should be a first step allowing the French insurer to better understand customers and anticipate the critical moment when they'll become educated enough to start to be looking for more tailored insurance products. Customer behaviour and preference data gathered now will help Axa tailor the products that will be best placed to meet customer requirements in the future and I think is an interesting tool to achieve this goal.


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