Ipsos Loyalty Industry Reports - 2011 General Insurance – Australia

What is your customer retention & growth strategy?

What follows are highlights of our findings.

What do I need to do to acquire more customers? ACQUISITION

What do I need to do keep the customers I have? CUSTOMER RETENTION

How do I get my current customers to use me for more of their banking products & services? SHARE OF WALLET

Customer Retention

Share of Wallet

Aquisition

We have some ideas. In early 2011 we spoke to 1,000 Australians

about their experiences in insurance with the specific goal of

understanding what was driving their behaviour.

Why did they choose their insurance company? Why are they loyal

to their insurance company? Where are the opportunities to grow

your business with existing customers?

The persistence of smaller, online, budget insurers and weakened consumer confidence post-GFC has maintained a soft insurance market for several years. The increasing number of insurance comparison websites has further added to the commoditisation of general insurance. If decisions are made by counting the number of boxes that are ticked how can we influence consumer choices and create loyal customers ?

The Natural Disaster Insurance Review, including the ongoing debate

around compulsory flood cover, and pressure to provide clearer and

simpler policy documentation is adding further challenges and

potential costs for the industry as insurers seek to provide good cover

at a price consumers are willing to pay. It can be a fine balancing act

between protecting consumers who take out insurance and keeping

insurance affordable to avoid increasing the numbers of consumers

who are either underinsuring or not insuring themselves at all

What will this translate to? Improved cover and more informed

consumer decisions? Increased competition in car insurance?

Pressure on insurers to reduce costs of delivering services and focus

on online channels? Only time will tell.

Despite the current challenges within the industry the

fundamentalsquestions remain the same:

Results in 30 seconds! The key findings you need to take away are: A. For insurance, price is a top of mind consideration but customers also continue to rely on experiences and reputations when choosing their main insurance company B. Top 4 banks lead on share of wallet but trail on almost every other loyalty and satisfaction measure

60%

36%

36%

27%

25%

Price

Previous experience with the brand

Reputation of the company

Quality of products and services

It was convenient at the time

Why did you choose your main insurer?

A Key loyalty measures – Where does

your brand sit? B

Experiences and reputation are key attractors

Loyalty Index Brand preference Likely to stay Recent trend inspend

All insurers AAMI NRMA Allianz GIO

Results in 30 seconds! The key findings you need to take away are: C. NRMA has a high proportion of high value and high loyalty customers making retention a critical issue to

protect and grow profits

D. Normative data can provide crucial contextual information but how do you know if you’re performing well? And if you’re leading the pack locally how do you know if you’re stacking up internationally?

Are your valuable customers at risk? C How does the Australia insurance industry

compare to the rest of the world? D

All insurers AAMI NRMA Allianz GIO

Low value low loyalty Low value high loyaltyHigh value low loyalty High value high loyalty

AUSTRALIA ARGENTINA CHINA FRANCE MEXICO

SATISFACTION BRAND

PREFERENCE

The healthy glow of competition

Loyalty Index Brand preference Likely to stay Recent trend in spend Share of insurance products

All insurers AAMI NRMA Allianz GIO

High levels of loyalty will deliver higher retention, however, we also need to understand how loyalty is distributed across high and low profit customer segments and how loyalty drivers may vary between the two groups.

This will enable you to tailor marketing strategies to build loyalty while maximising the return to your bottom line.

Strong competition from ‘challenger’ brands… We all know that price and products are important and our analyses confirmed this. But what is really interesting is what else is coming together for customers to make them feel that extra bit of loyalty to their insurance company?

After the basics, the most important drivers of loyalty are those things you do to make life easier for your customers and make them feel valued – ease of signing up and renewing their policies, resolving their problems, efficiency in processing their claims and rewarding their loyalty.

Overall customer service

Staff knowledge

Friendliness

Resolve issue

Complaints handling

Ease getting in touch

Range of policies

Ease of signing upEase of renewing

Relevance of policies

Competitive premiums

Clarity of policies

Overall claims handling

Efficiency in processing claims

Loyalty/rewards scheme All Insurers

AAMI (n=181)

NRMA (n=153)

Allianz (n=62)

GIO (N=51)

Where are the opportunities for growth? Sometimes your customer retention & growth strategy isn’t about getting new or keeping existing customers

For many companies the major gains from their customer growth strategy will come from getting their current customers to give them a greater share of their insurance wallet. Car and home insurance are the backbone of the consumer GI business. While there is a high incidence of consolidation there is still some opportunity to build share of wallet through home to motor and motor to home cross-sell campaigns. Growth opportunities also exist in developing offers in the area of Life, Car breakdown and Income insurance.

Around 13% of car insurance and 14% of home insurance policy holders are leaking to other providers

90%

75%

39%

23%

21%

11%

6%

2%

78%

64%

5%

5%

10%

2%

1%

0%

Car insurance

Home insurance

Health insurance

Life insurance

Car breakdown insurance

Income insurance

Travel insurance

Pet insurance

% with product

% with main insurer

Opportunity to grow revenue through offering new products

Customers with 3 or more products are significantly more favourable towards their main insurer in the areas of customer service, being easy to deal with and product factors, key drivers of loyalty.

These findings suggest that these drivers could be strengthened and leveraged to support acquisition and retention strategies.

How many products is enough?

Overall customer service

Staff knowledge

Friendliness

Resolve issue

Complaints handling

Ease getting in touch

Range of policies

Ease of signing upEase of renewing

Relevance of policies

Competitive premiums

Clarity of policies

Overall claims handling

Efficiency in processingclaims

Loyalty/rewards schemeAll Insurers

1 product

2 products

3+ products

Adding customer value to the mix – what do you really stand to gain or lose?

9

Loyalty Index

High value High Loyalty

Low Value High Loyalty Customers

Low Value Low Loyalty Customers

High Value Low Loyalty Customers

Segment size : 31% Segment size : 19%

Segment size : 28% Segment size : 22%

Insurance is one of the few industries where more customers does not always deliver more profits – a disproportionate amount of revenues and profits can come from a small but extremely valuable segment of customers. This is why it is crucial to add a customer value to the mix.

NRMA has a significantly larger proportion of profitable loyal customers. Strategically, insurers should look to protect their high value but vulnerable customers through embedding them with multi-policy and other loyalty offers.

Value & Loyalty Map – All Banks

23 24

15

29 28

31 32 29

37 35

28

33

20

27

31

19

12

35

7 6

All insurers AAMI NRMA Allianz GIO

Low value low loyalty Low value high loyalty

High value low loyalty High value high loyalty

-9

-14

1

6 4

11

1

-3 -1

-4 -6

-4 -4

-17

8 11

AUSTRALIA ARGENTINA CHINA FRANCE MEXICO

What’s the norm? Normative data can provide crucial contextual information – price always rises to the top for consideration and service delivery rates high when looking at retention. How do you know if you’re performing well? And if you’re leading the pack locally how do you know if you’re stacking up internationally?

LOYALTY INDEX BRAND PREFERENCE RECOMMENDATION SATISFACTION

French insurance customers are less satisfied with their main insurer when compared to Australian insurance customers.

Australia’s scores are represented by the blue dotted line and all other scores are relative to Australia.

Insurance customers in Mexico are much more likely to recommend their main insurer when compared to Australian insurance customers.

What’s behind the Ipsos Loyalty Index? Ipsos surveyed 10,000 customers of different brands in different sectors; and surveyed them again a year on. The variables that best predicted Loyalty were used to create the Ipsos Loyalty Index.

Loyalty, from our research and experience, is about attitudes AND behaviour and it is the combination of both of these in the Loyalty Index that provides the extra predictive validity above and beyond single item measures.

Customer Attitudes + Behaviour = Loyalty

ATTITUDINAL LOYALTY

BEHAVIOURAL LOYALTY

Brand preference

Likelihood to stay

Share of business

Recent spending

Loyalty Index

Prediction of 12 month churn

55% 44%

57% 49%

60% 51%

73% 68%

All industries Banking

Loya

lty

Ind

ex

Likelihood to recommend (NPS)

Satisfaction

Likelihood to continue

Loyalty Index

About the research

We surveyed 1,000 Australians and asked them a series of questions aimed at understanding what was driving their behaviour towards their main insurer. Questions included:

• What insurance companies do you currently have a relationship with?

• What insurance company do you consider to be your main insurer?

• What insurance products do you currently own?

• What insurance products do you currently own with your main insurer?

• How well is your main insurer performing across categories like customer

service, having quality products and claims process?

We analyzed this information to answer questions like:

• What is the relationship between customer advocacy and new customer acquisition?

• What are the key drivers of customer retention? • Where are the opportunities for insurance companies to grow

their share of their customers insurance spend?

Let us know if we can help!

Julie Harris | Director, Ipsos Loyalty julie.harris@ipsos.com +61 2 9900 5191 - office

Brett Tucker | Managing Director, Ipsos Loyalty brett.tucker@ipsos.com +61 2 9900 5130 - office