Changes in consumer expectations have “thrust insurance companies into an identity crisis that calls on them to redefine their role,” a new report from Bain & Company says.

Consumers value purpose, not just coverage for losses, and the traditional premise of insurance – providing capital to cover risk and reimburse claims – doesn’t “fully satisfy” anymore, Bain says.

Extreme weather events, covid, ageing populations and technological disruption are combining to radically change the risk landscape for home, car, health, and financial well-being.

Bain’s Customer Behaviour and Loyalty in Insurance: Global Edition 2023 publication says policyholders are increasingly looking to providers for risk mitigation – not just loss reimbursement – after "intense turbulence and uncertainty” in recent years.

Insurers have the “chance, perhaps even the duty, to take a firmer hand in moving beyond reimbursement for damage to encouraging behaviours and providing solutions in ways that will reduce risks,” says the report, which is based on a survey of 28,765 consumers in 14 countries.

The insurance sector is set for a “collective shift in the industry’s central purpose” to risk solutions over the next decade, Bain says, which could help insurers expand the market to new demographic or geographic segments. It points to past efforts such as advocating for seat belts in cars and safety standards in house construction.

"The business case for a broader role can be tough to embrace, with a multiyear payback period and new skills required,” the report said.

“The role entails figuring out how to promote personal advice and service rather than product, managing an ecosystem of partners, using data to target the right set of interventions, and adopting new economic models.”

New technologies and "massive” data sets on auto driving behavior and other relevant trends, enable insurers to directly partner with customers to identify, prevent, and mitigate each risk event.

"Consumers see a greater role for insurers than merely delivering on the basics of coverage. That expanded role starts with the broad dimension of risk reduction.”

Nearly 90% of Australian consumers are highly interested these in risk prevention services from their insurer, such as inspection services prior to buying a car or home, and rewards for healthy living, Bain says.

Last year, general insurance in Australia grew 10% while life insurance contracted 1%.

Some insurers are already working with customers and governments to prevent risks via behavioural change, advanced risk identification, tracking, and management. Australians are placing more emphasis on emotional and social elements of value in insurance, Bain says, such as whether their insurer engages in transparent and responsible business practices, and whether the product is a good investment for future generations.

Bain says few insurers currently excel at using these elements in their proposition.

"Australian consumers want insurers to help reduce risk and simplify interactions,” the report said. “Consumers also value more purpose-driven product features. Customer loyalty increases when insurers excel in these higher order value elements.”