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Strategy, Transformation, Dec 22, 2021

Using MarTech to make the most of FCA-driven insurance sector changes

James Breeze

As we know, Citizens Advice submitted a super-complaint to the Competition and Markets Authority (CMA) in September 2018, raising concerns that longstanding customers were paying more than new customers (a ‘loyalty penalty’) in five essential markets - mobile, broadband, cash savings, home insurance, and mortgages.

To correct the market practices, FCA guidance set out in PS21/5 and updated in PS21/11 comes into force from 1st January 2022. After 1st January 2022, they must pay redress or make repayments to people if a delay to implementing the changes negatively impacts them. Firms have until 17th January 2022 to implement the pricing and auto renewal disclosure remedies in full.

Related article: Understanding MarTech in a customer-centric world

Turning a threat into an opportunity

These FCA regulation-driven changes will have the effect of rebalancing prices between new and existing customers. This will profoundly change the nature of the UK home and motor insurance markets, but exactly how will not become clear until later in 2022.

The changes will certainly ensure lower average prices paid by renewing customers. Will this mean more customers choose not to move at the end of their deal and therefore make retention easier? It will certainly intensify competition for new customers, as this group will likely be a smaller target audience. Will the nature of these rate chasers change so that acquisition strategies need amending? It is unthinkable that they are not changed in some way.

There are a number of unknowns, but it is not difficult to see that this change will have an effect on board level Objectives and Key Results (OKRs) and Key Performance Indicators (KPIs):

  • CEO: Growth (revenue lost from increased churn rate), efficiency (combat decreased margin and cash flows), and costs (increased cost to retain and acquire);

  • CIO/CTO: Reflect business imperatives and increase velocity at which change needs to be delivered (force multiplier, creative tech, scalable foundation);

  • CMO/ CDO : Digitisation (increased importance of digital channels), and customer experience (integration of customer journeys).

We at Credera believe that insurers need to embrace the rules and focus on maximising market opportunity. They need to enhance business agility and build a strategic eco-system to create compelling customer propositions. This in turn will lead to long-term customer trust, business growth, and efficiency.

The process will require enhanced digital experiences across the full customer lifecycle – acquisition, in life, and retention. Of course, there are other factors that will need to be enhanced, but technology (MarTech specifically), cloud, data, and analytics are key enablers and even more critical to success in the new market paradigm.

Growth in adversity

Now more than ever, insurers need to build long lasting relationships with customers to retain them. Understanding and anticipating their needs more effectively and leveraging capabilities to focus on relationships will create competitive edge.

Building long lasting customer relationships is increasingly enabled by data and technology, particularly within the omnichannel world that we live in today. Insurers need to embrace the advances within MarTech and build out their digital customer experience.

The following changes can all help to create competitive advantage:

Breaking down product silos

Traditionally, the insurance industry and therefore many insurers have structured their business around single insurance products. If reducing churn is an increasingly important metric, then increasing multi-product customers will be key. Good cross-selling techniques to accelerate this are enabled by taking a customer-orientated approach rather than one that focuses on product.

Developing a retention communication approach

Having a specific program of communications as customers approach the end of their contract is a key retention technique. Using insight gained through the lifetime of the product to target personalised communications in the lead up to the message targeted at resign – relevantly timed, triggered communications - are extremely powerful examples.

Automation built on insight guided by experts

MarTech serves as a force multiplier for businesses. It can deal with a massive customer base volume in a personalised and efficient manner whilst helping to reduce cost. Letting the machine take the load, guided by CRM subject matter experts - testing, learning, and optimising as they go. Ultimately, the aim is to target customers with relevant and timely messages, giving the potential for the best of both worlds – efficiency and effectiveness.

Easy retention for the customer

The act of staying with you should be as easy as possible - one click and you continue your relationship for another year. That shouldn’t mean feeling tricked, so creating an informed path to that point is also key.

In a nutshell

The above is not an exhaustive list and the actual strategies utilised, and the priority of them, is dependent on the individual insurer, its customer base, and its legacy technology infrastructure. This is not a ‘one size fits all’ industry after all.

As you undergo this period of change and disruption, the team at Credera are on hand to support with our over 30 years’ experience within Insurance and digital marketing, so please feel free to contact us.

In the meantime, we hope you get value from reading our thoughts on connectedness.

Download the whitepaper

Read more:
Whitepaper: Are you failing to deliver a single view of the customer?
Key takeaways from 'What the FLoC? How do you prepare for a post-cookie future?'
Why connectedness is vital to achieve personalisation and a single view of the customer
Meet James Breeze
Podcast: The barriers and opportunities to creating a single view of the customer - Part 1
Podcast: The barriers and opportunities to creating a single view of the customer - Part 2

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