What are the growth opportunities in a sluggish and highly competitive insurance market?
The Accenture P&C 2020 benchmarking study compares the performance of a sample of leading insurers in the European market, on several key parameters of the value chain, namely customer acquisition as well as contract management. insurance and claims. This study reveals that many P&C insurers have significant improvement opportunities in relation to industry best practices and winning strategies. This article more specifically assesses the effectiveness of the growth strategy of non-life insurers, by comparing their performance and skills on the following criteria: retention capacity, insurance multi-equipment, banking equipment, or even quote conversion rate.
P&C insurers must reassess their growth strategy
Most P&C insurance players face a sluggish market in which the annual indexation of premiums, the main driver of growth, is limited due to the low rate of inflation. In addition, the level of competition is increasing between traditional players but also with the arrival of new digital competitors driven by new digital uses, the development of insurance companies on niche products, and the vertical integration of ecosystem players. within the insurer value chain. To achieve profitable growth and differentiate themselves in a competitive market, insurance companies must reassess their growth strategy and recognize that it is essential to improve their performance in the following areas:
|Criteria||Growth levers||Key facts|
|1. Retention rate|
% of contracts retained at the end of the year
|93%||It is cheaper and more profitable to keep an existing portfolio than to acquire a new one|
|2. Insurance multi-equipment rate|
% of customers with more than one contract
|65%||The cancellation rate decreases for customers with several contracts with the same insurer (even more if these contracts are grouped into one)|
|3. Banking multi-equipment rate|
% of banking customers with an insurance contract
|12% (automobile)16% (goods)||Increase the value of the banking client portfolio by leveraging open and digital insurance business models|
|4. Conversion rate|
% of quotes converted into new contracts
|30% (direct web)65% (intermediate)||Increase the collection with production of equivalent estimate|
1. Retention rate – Win the loyalty of your customers day after day
93%. This is the retention rate achieved by non-life insurers with the best performance in terms of loyalty and sustainability of customer relationships.
P&C insurers with the best retention rates achieve up to 93% retention rates, while most traditional insurers do not achieve 90%.
The retention rate assesses customer loyalty by comparing the number of non-life insurance contracts kept in the insurer’s portfolio at the end of the year, with the number of existing contracts at the start of the year (at the end of the year). opposite of “attrition rate”). It includes both contract terminations decided by the insurer (sanitation) and those desired by customers.
Avoiding contract terminations (in particular by customers) is a key issue in the growth and profitability strategy of insurers.
Indeed, it is generally less expensive to keep contracts and existing customers than to acquire new ones. In addition, newly acquired contracts and clients are generally less profitable than the existing portfolio.
The retention rate can be influenced by the insurer’s termination strategy (e.g. with a portfolio consolidation strategy) as well as the maturity of the portfolio and distribution channels (e.g. fast growing portfolios and direct distribution channels generally have lower retention rates (less than 90%).
Our survey identified seven good practices to be developed to strengthen customer loyalty and improve the retention rate:
Dashboards monitoring customer retention in real time, a clear reporting and governance model, the use of a CRM providing a unified 360 ° view of the customer and all of their contracts, product offers grouped including customer benefits (discounts, etc.), an annual revaluation policy encouraging retention, a retention unit for reactive processing and proactive anticipation of termination requests, personalized offers as well as responsible commitments and sustainability from insurers.
2. Insurance multi-equipment rate – Cross-selling to your customers
65%. This is the rate of multi-equipment reached by the leading non-life insurers in this field.
The best performing P&C insurers achieve multi-equipment rates up to 65%, while the majority of insurers have rates below 45%.
The multi-equipment rate is obtained by comparing the number of customers with more than one active insurance contract with the same insurer, with the number of customers with only one. This indicator makes it possible to take into account cross-selling (sale of new contracts to customers who already exist in the portfolio).
The development of cross-selling aiming to multi-equip the customer is a key factor in the growth of the turnover of insurers and the retention of their customer portfolio. Indeed, we observe that when customers go from holding a single contract to holding several contracts with the same insurer, the attrition rate decreases by 20%. This rate drops again by 20% when these contracts are combined into an offer.
Our survey identified four opportunities to increase multi-equipment:
A CRM with a 360 ° vision of the customer’s needs associated with a suggestion to the advisor of the “next best action” for that customer, proactive marketing campaigns that encourage cross-selling, bundled product offers including customer benefits (discounts …), Or the commercial rebound during incoming customer calls.
3. Multi-equipment rate for bank customers – Equip customers of partner banking networks
12-16%. This is the rate of equipment in insurance of bank customers reached by the best non-life insurers in this field (respectively with automobile insurance and property insurance)
On the side of traditional banks, the best students manage to equip up to 12% of their customers with an automobile insurance contract and up to 16% with a property insurance contract. The majority of bancassurers are lagging behind, with rates below 8% for auto insurance and 13% for property insurance.
The equipment rate for bank customers is based on the percentage of bank customers with insurance contracts.
Establishing partnerships with banking distribution networks – and to a greater extent distribution partnerships via integrated ecosystems – and increasing the equipment rate via these partnerships represents a strategic growth opportunity for insurers. This strategy is part of the development of new business models driven by open-insurance and digital uses, allowing insurers to offer their customers a smooth and fast underwriting experience. This allows insurers to capture areas of under-exploited value in the market.
The equipment rate varies depending on the type of distribution partnership with the ecosystem and the sector of activity. We see, for example, that in the context of a partnership with a banking establishment, the equipment rate in automobile insurance is generally lower than that of property insurance or life insurance (boosted by the cross-selling of loans mortgage).
Our survey identified four levers for increasing sales of insurance contracts through a partnership with a banking establishment or, more generally, with the banking ecosystem; to know :
The development of an incentive-to-sell compensation strategy for the ecosystem, a clear reporting and governance model, the sale of bundled offers covering several insurance needs, the upstream data collection allowing the launch of campaigns proactive marketing.
4. Quotation conversion rate – From initial contact to subscription
30-65%. It is the average conversion rate of business opportunities for the leading non-life insurers in this field (direct distribution on the web and by intermediated network (brokers, agents).
In terms of conversion rates for non-life opportunities, the leaders in this market reach up to 30% via direct distribution channels on the web and up to 65% via intermediated distribution.
The conversion rate of opportunities is calculated based on the percentage of conversion of the opportunities into a contract.
Increasing the conversion rate of opportunities is essential to increase the efficiency of the underwriting process and therefore increase revenue at constant quote volume.
The conversion rate of opportunities generally differs by distribution channel and industry. It is indeed lower in direct distribution on the web than through an intermediary.
Our survey identified five practices that improve the rate of transformation of opportunities; namely: a competitive pricing strategy, quotes that are easy and quick to complete with a limited number of questions, systematic automatic reminders in the sales and management process, telephone follow-up of high-potential leads as well as the development of offer personalized in their respects.
Significant differences in the performance levels displayed by insurers
This comparative study on the P&C insurance sector highlights significant differences in maturity between insurers, in terms of best market practices and the ability to seize growth opportunities. It also highlights the fact that insurance companies that perform better in some areas may perform poorly in others. This confirms Accenture’s observation that many insurance companies rely on a set of operational, organizational and IT tools that have developed over time, but which more often than not, are not well coordinated and optimized. These shortcomings limit the ability to seize growth opportunities and adopt the good practices previously mentioned.
Rethinking the growth strategy to stay ahead of the competition
Despite a sluggish market, combined with intensifying competition, opportunities exist for European property and casualty insurers to strengthen their growth and collection.
The uneven performance displayed by most of the insurance companies surveyed for this study highlights the existence of many untapped growth levers, which insurers can take advantage of to stay ahead of the competition.
However, in order to harness the full potential of these growth opportunities, insurers need to take a holistic approach and thoughtfully activate all key performance levers. The good news is that optimizing the growth strategy has been proven to generate many benefits in the short and long term, both for insurers and their clients and intermediaries.
How do you assess your performance compared to that of your competitors? If you would like to obtain details on the best practices and growth opportunities described in this article or to assess your performance and compare it to that of the leading players in the sector, contact us: