Consumers turn multi-modal

PEOPLE SHOPPING for insurance policies are using different channels to do so, IBM said yesterday, and insurers must therefore “embrace multiple channel strategies” to stay on top of their game.

Local insurers, however, said the Philippines remains an unsophisticated market and consumers must be personally convinced of the merits of insurance before they purchase policies.

The IBM Institute of Business Value — IBM’s research arm — said in statement yesterday that results of a survey of more than 21,000 consumers from 20 countries showed that insurance consumers have become “multimodal.”

“[M]ore than 60% of consumers indicated that they are planning to use more than one interaction point — such as phone, website or face-to-face meetings — to purchase insurance policies,” it said.

A fifth, it said, used more than four interaction points to search and compare their insurance options.

The most preferred channels that insurance customers used to gather information are:

• the insurer’s own website (49.4%);
• interaction with the tied agent (47.9%);
• interaction with friends or family (46.4%);
• independent agents or brokers (39.3%); and
• independent comparison websites (35.5%).

“[The survey] determined that shopping and buying patterns for insurance are shifting, and that insurance companies must embrace multiple channel strategies to reach consumers,” IBM said.

A key finding is the importance of personal interaction; that those who received information about a product from an person would stick with that person until the actual purchase.

IBM recommended that insurers increase “touch points” beyond personal interactions.

IBM also pointed out that with customer loyalty dropping in 2010, consumers can and will switch insurers if their preferred interaction points are not available. Only 31% of respondents stayed with one insurer for their coverage needs last year, down from 42% in 2008.

“To reverse the declining loyalty trend, insurers must focus on perfecting their interaction quality so that they can turn consumers into advocates of its business,” IBM said.

While the Philippines was not included in the survey sample, IBM ASEAN Insurance Leader Primo B. Aguas said the local insurance industry could still learn from the study.

“The findings in relation to increasing distribution channels are applicable. The majority of Filipinos are young and tech-savvy,” he said in an email to BusinessWorld.

He also pointed out the improvement of telecommunications infrastructure, increasing Internet penetration and steady growth in the use of smartphones as signals for insurers to provide products and services through these channels.

However, industry players said the Philippine insurance industry is not developed enough to ride the multimodal trend.

According to latest data from the Insurance Commission, only 13.90% of the population was insured in 2009. The insurance penetration rate — total premiums as percentage of gross domestic product — was a mere 1.02% that year.

“Insurance consciousness in the Philippines is nowhere as strong as it is in our neighbors Korea, Singapore and Malaysia. Insurance is still a product that has to be pushed,” Pioneer Life President Lorenzo O. Chan said in an email to BusinessWorld.
Pru Life UK Chief Executive Officer Antonio G. de Rosas added it is important for insurance companies to use tied agents and partner banks to tap into a bigger customer base.

“Customers still need to be convinced they need to protect themselves and their wealth,” Mr. de Rosas told BusinessWorld in a phone interview. “We’re the ones who need to reach out to them.”

He estimated that 60% of Pru Life’s sales are made through its 2,500-strong agent force.

“It’s difficult to sell insurance. You need the individualized help of trained agents,” Mr. de Rosas explained.

While insurance companies have websites, customers use them only to search for information on products, after-sales services and company information, Insular Life Senior Assistant Vice President Ana R. Soriano said.

“Most buyers of life insurance still want to have a face-to-face transaction prior to making a decision to invest on an insurance product. Sales are still agency-driven,” she explained in an email.

Philippine insurance sales might be agent-driven but the number of Filipino agents is still easily dwarfed by those of its Asian counterparts.

“We have about 22,000 agents for the entire industry,” Mr. de Rosas said. “[Insurer] Prudential Indonesia has 70,000 agents alone. Thailand has around 300,000 for their industry.”

IBM’s Mr. Aguas remains optimistic, though, about diversifying channels for insurance customers.

“While agent interaction is still the primary means for selling and servicing insurance, there are now windows of opportunities for insurers to broaden and deepen their reach through other channels. … Consumers are becoming more sophisticated and there are different types of consumers with differing needs and wants,” he said. — Diane Claire J. Jiao, Businessworld