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13 July 2020
Car and home and contents insurance are the only risk products considered as essential by domestic policyholders, according to a KPMG survey of 1500 consumers.
It says life and income protection cover is seen as essential by only a third of the respondents.
KPMG says up to 35% of insurance customers are looking to make lifestyle changes to avoid the need for their insurance, particularly in travel, posing significant challenges for insurers in sustaining future revenues or achieving organic growth.
“In a time of spend-conscious customers and in combination with a changing legal environment – for example, anti- hawking and add-on selling – strong brand positioning and attractive value-add propositions will be crucial in the new reality,” the consultant says.
Insurers should “assess their retention strategy” and may need to consider offering financial relief to help customers. Most consumers favour discounts on premium, followed by a pause on premium payments and rebates on paid premiums.
KPMG predicts an increase for pay-as-you-use insurance in general insurance as consumers demand flexibility. It says insurers will be “benchmarked against the more seamless ‘click-call-face’ interaction channels offered in sectors like retail.”
Insurers have been the most affected financial service in terms of consumer expectations in the pandemic, KPMG says, with many people now more aware of what their policies do and do not cover.
KPMG FS Strategy, Tim Thomas, a partner in KPMG’s Global Strategy Group, says the financial impacts from COVID-19 are having far-reaching consequences on consumer spending and attitudes, and there is a “refusal to return” to the old pre-Covid-19 ways of interacting with providers.
“Providers need to be aware that even those whose job has not been directly impacted are reducing their overall and discretionary expenditure, and they must respond to these new circumstances and demands,” Mr Thomas says.
KPMG says many customers now expect a “complete rethink” on travel, life and income insurance due to the financial pressures they currently face. More than 70% want better value for money from their insurance, and one-third of consumers are either switching providers or considering cancelling policies in the next 12 months.
“Insurers who adopt a ‘first-mover’ strategy in transforming their business and operating models to this new reality [will] position themselves well to become the winners after COVID-19,” KPMG says.