A customer’s attention was in short supply long before the term “attention economy” entered the business lexicon. Wherever consumers are online, vendors from all industries are competing for attention. Staying visible is the name of the game, but it’s getting harder and harder as digitalization advances and there’s a continued clamor from businesses in every conceivable industry vying for limited customer attention.
At the end of each year, the battle intensifies. Retail sales soared during the Christmas season, with special events such as Black Friday, Cyber Monday and Singles’ Day enticing customers to take advantage of campaigns and offers. At the same time, soaring electricity and gas prices have prompted many customers to consider switching utility providers. In Europe, insurance renewal season intensified in November, with wildly different rate increases in various corners of the market, setting an uncertain foundation for 2022.
As a result, the relevance of the attention economy continues unabated, and insurers will continue to compete for the wandering gazes of customers.
Auto Insurance Spotlight: Tough Competition in a Tight Market
The auto insurance industry in particular is feeling the effects of wandering customer attention. While many other insurance products are still benefiting from the pandemic-driven push towards digitalization, internet search rates for auto insurance products are down double digits. Germans’ interest in car insurance in November 2021 was only 30-40% of November 2019, according to Google search trends, even though 80% of Germans still use their vehicle at least once per week, as they did before the COVID -19 pandemic.
At the same time, the market is shrinking, and not just as a side effect of the shift to mobility. New vehicle registrations are down 25%, in part due to the current chip crisis, and auto insurance premiums are down 8%. The reduction in claims during the COVID-19 pandemic had a positive effect on financial results, but it also made price increases difficult to implement. As a result, the 2020 changeover season cost car insurers around €250 million in premium volume.
Today, more and more traditional players are developing their digital presence. In 2017, only five traditional omnichannel auto insurers were among the top 20 internet search results, according to McKinsey analysis. This number of insurers has now increased to 12. In the meantime, young digitized companies have entered the market. Some auto companies have already introduced “integrated insurance” elsewhere, while major tech companies and retailers have begun to consider becoming insurance players.
The auto insurance market in particular is becoming increasingly tense and polarized. In underwriting, five providers accounted for almost half of total profit in 2020, according to McKinsey analysis, and another 70 for the rest. Ten subscribing players did not derive any benefit from it, despite considerable marketing investments.
How can businesses attract and retain customers?
More investment in marketing is not the answer. This is particularly important because rising selling costs affect the price in the medium term, which is the main reason why customers switch insurance in 67% of cases. “Price walking” (low-cost initial offers whose price increases in subsequent years) has also become increasingly difficult for companies to implement due to legislation. This is the case for energy companies in Germany, but also for insurance companies in the very competitive British market.
What can businesses do? There are several options:
- Manage budgets smarter. Every euro invested must be used as efficiently as possible for the most attractive customer profiles (those with the highest lifetime value, for example), as well as for the measures with the highest conversion rates. Approaches such as smart bidding and trying to talk to customers early in the process can be helpful, and in our experience can drive efficiencies and growth of 30% and 10%, respectively. , with the same amount of investment.
- Edit products. Some service providers have been experimenting with intra-annual primary maturities and longer durations for a long time. In fact, according to the German Insurance Association (GDV), 16% of all car insurance already operates on an intra-annual basis. This approach can be advantageous against comparison portals, which bundle their marketing spend during the year-end renewal season. And those year-end expenses have also increased significantly recently. Modern telematics approaches also offer opportunities to develop new customer segments.
- Continuously capitalize on prospects. Visibility is only useful if it leads to more customers closing more deals. Digital pioneers succeed in maintaining their visibility: According to an analysis by Similarweb, digital pioneers’ pages attract more visitors, who stay three to four times longer and click directly from the homepage half as often than visitors to non-pioneer sites. Omnichannel providers can then follow up offline, which requires excellent lead management in terms of technology and process.
- Use innovative ecosystem approaches. In the longer term, suppliers can raise awareness in new ways, such as targeting motorists when they buy a car, change a tire, fill up at the gas station or park. Customer loyalty also benefits from ecosystem services, and the impact of this approach will extend well beyond 2022.
In the future, visibility will remain a central criterion for success, and not only for European car insurers. Businesses that can position themselves in front of customer headlights and deliver added value will be winners in the digital world.
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