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Insurance Strategic Update: September 2020 Review

Many client and agency teams are currently working day and night crafting their 2021 brand plans. In a more normal year (remember those?), the process for data-driven marketers would start with a formal review of FY20 brand and channel performance in order to determine what to do, i.e., decide which initiatives should be continued, stopped or re-imagined.

But this year has been unlike any other, throwing a wrench into typical testing strategies and learning agendas that would typically drive future focuses and priorities.  P&C and life insurance companies have been uniquely impacted by COVID-19 with everything from an unprecedent reduction in driving miles to the inability to have in-person medical exams to bind a life insurance policy.  Insurers have been quick to respond by earmarking millions of dollars to be returned to auto insurance consumers and identifying new digital-only ways to bind life insurance policies, but these solutions have been sometimes met with increased shopping habits and shaky markets making new life insurance polices even more risky. 

Brands that take a longer view and invest in customer relationships, build differentiated experiences, nurture brand loyalty by eliminating friction points and deliver real value will see greater overall success.  And these elements are shifting to the digital space rapidly, emphasizing the need for brands to invest in their digital infrastructure, gain a better understanding of digital metrics, and differentiate customer strategy from what may have been successful prior to the environment we now find ourselves in.

All this change will force smart marketers to push beyond the boundaries of their tried and true playbooks, embrace new opportunities, and capitalize on newly developed consumer interests. 

Industry Insights and Trends

Listed below are observations of the insurance industry gleaned from recent reported stories.

P&C insurers' performance declines in the first-half of 2020 amidst pandemic

  • The latest mid-year report from Fitch Ratings shows operating performance for North American property & casualty insurers declined in the first half of 2020, with the ongoing COVID-19 pandemic affecting underwriting results and investment earnings.
  • Annualized Generally Accepted Accounting Principles (GAAP) operating ROAE declined to 2.8% in the first half of the year, down from 8.3% in 2019.
  • Group P&C insurers reported manageable losses from COVID-19 in the period, though considerable uncertainty remains regarding ultimate losses, said Fitch.
  • “While the coronavirus pandemic created an unprecedented operating environment and heightened volatility across the global economy, mid-year 2020 North American P&C (re)insurer underwriting results represent an area of relative stability, reflecting the industry’s robust risk management focus,” Christopher Grimes, director at Fitch Ratings, said in a statement.
  • While overall losses remain manageable for most insurers, losses from natural catastrophes and civil unrest outpaced claims from COVID-19-induced damages.
  • Only workers’ compensation showed price reductions, and they continue to slowly decrease in magnitude.
  • Overall, price changes differed significantly by account sizes. Small commercial accounts grew by mid-single digits; mid-market accounts showed double-digit increases; and large accounts were well above this range.

Telematics and vehicle build data – the next frontier for auto claims

  • The next phase in the evolution of auto insurance claims will be heavily influenced by two key elements: telematics and vehicle build data. Telematics tools are growing in popularity around the world. The data collected by telematics devices provides insurers and claims adjusters with information such as: how fast a vehicle was traveling, whether there was any hard or erratic breaking, the mileage driven, and the GPS location of specific incidents. Vehicle build data is essentially a complete picture of what a vehicle was equipped with when it rolled off the assembly line.
  • For true progress to be made in the telematics and vehicle build data arena, insurers have to develop stronger partnerships with automakers and original equipment manufacturers (OEMs). Brower described this relationship as a growing co-dependence that requires a large degree of participation from all parties.
  • Having vehicle build data helps insurance underwriters and claims adjusters. For underwriters, having the official DNA of the car helps with pricing the risk appropriately. It also enables them to give appropriate discounts for in-vehicle safety features and other aspects of an automobile. But it’s the claims space where this will be really important.
  • Carriers like having this data at their disposal because it supports their proactive touchpoint with their customer after an accident, and it greatly simplifies the claims process for customers. This allows carriers, specifically the adjusters, to be seen as guides who are there to hold the customer’s hand through the process and help them recover from an accident. Having telematics and vehicle build data could also help in reducing insurance fraud, especially in terms of body shops filing bogus or inflated claims for unnecessary repairs.

COVID-19 speeds up the modernizing of the life insurance industry

  • Success will lie in harnessing technology at all points in the journey, this includes new ways to access personal health information and connecting the application process digitally, eliminating time and paperwork.  By tapping alternative sources of information, specifically electronic health records, the underwriting time for some customers has been reduced from weeks to just minutes in some instances.
  • The role of agents will be ever-critical as COVID-19 further advances digitization in the life insurance industry.  At its core, life insurance is deeply personal and while advances in technology are certainly beneficial for all of us, the personal connections, guidance and assurances that agents can bring are invaluable to many customers.
  • While the pandemic has added urgency to digitization efforts, this transformation has always been critical for the industry to keep pace with consumers.  COVID-19 will continue to change our world and the life insurance industry in particular, as it has set the stage for continued innovation. With the support of like-minded distribution partners, we will start to see positive shifts for customers and insurers alike.

How the auto insurance industry gave away billions and still left customers unsatisfied

  • In an industrywide effort to address the unprecedented 55% decline in miles driven during the height of the pandemic, the industry returned more than $10 billion by mid-April without anyone asking for it.
  • Historically, the auto insurance industry has maintained a high retention rate, with industrywide consumer loyalty typically hovering at around 88%. One of the best predictors of loyalty is how satisfied consumers are with their auto insurance carrier.
  • As of late March 2020, just as COVID-19 was beginning to impact the economy, 68% of auto insurance customers indicated that they were “very satisfied” with their auto insurance carrier. That number has fallen dramatically throughout the pandemic to just 56% at the end of June 2020.
  • Many auto insurance customers never received the message about COVID-19-related rebates. As of late June, research showed that just 56% of consumers said they were aware that their carriers took premium relief actions. That’s a big problem since low rates of awareness can lead to a significant reduction in renewal certainty.
  • Another major factor affecting consumer response to the industry’s premium relief offers is continued economic uncertainty that will linger long after the short-term rebates. With more than 55 million cumulative announced initial jobless claims since April, the financially impacted cohort of auto insurance customers is larger than at any time in the past.
  • The third factor driving loyalty challenges, despite relief efforts, is the nature of the insurance product itself. Consumers are not very forgiving and have a short memory for positive reinforcement. They remember clearly that they were charged a risk premium for an asset that wasn’t being utilized at the recent height of the pandemic, but they are less likely to recall the efforts of the industry to offer a rate reduction.
  • This phenomenon is driving the sharp increase in interest in telematics programs, wherein insurers track customers’ individual driving behavior via a mobile app or installed device and assign premiums based on their driving style and distance driven. All told, 59% of auto insurance customers believe that they will be driving less in the future, with 46% of those showing an increased interest in telematics programs over the past several months, suggesting that they feel they will be driving less and want a plan that recognizes their reduced risk.

Consumer Sentiment

Dentsu Pulse Survey

Dentsu Aegis (Merkle’s parent company) has been publishing a recurring study on consumer sentiment during the COVID-19 pandemic.  Some observations from the September 17 Dentsu Navigator report are highlighted below.

Consumer concern over other national issues in addition to the health and economic crisis stemming from COVID-19 is growing. As November nears, the US Presidential election is a top issue as well as social unrest and racial inequality as police brutality against Black Americans continues to occur and make national news

Top national issues

For months now consumers have told us they are paying more and more attention to brand responses to COVID-19. Now, that has leveled off, with the number of respondents paying more attention decreasing by 10 points while those paying the same amount of attention against a higher baseline has increased by 13 points.

Pie Chart

While more engaged in the US political landscape overall, most American consumers say they pay attention to brand’s political stances and that they are especially paying more attention during an election year.

Political stats

Boomers are significantly less likely than other generations to be paying attention to the political stances of the brands they purchase. Interestingly, it seems that engagement with US politics does not directly correlate with attention paid to brands’ political stances.

Millennial stats

Latest Trends

TransUnion 2020 Insurance Shopping Annual Report: Trends, Insights and Predictions

Auto insurance shopping had been trending higher year-over-year (YoY) through the first two months of 2020, driven by increased vehicle purchases, more and easier ways to shop, and record insurance industry advertising spending.  However, the global coronavirus pandemic quickly cooled off the insurance market and shopping rates dropped as much as 14% YoY in the early weeks of the crisis.

Since then, shopping has rebounded and is now higher than 2019 levels.  A closer look at the data reveals how the shopping landscape has changed. Take for example that:

  • Many higher-risk customers who might otherwise be expected to shop for insurance to find better prices tended to stop looking during the onset of the pandemic, possibly because other financial priorities took precedence
  • The youngest consumers, who were most likely to have their income affected by pandemic-related lockdowns, showed big swings in insurance shopping
  • Many ordinary events that would normally drive shopping behavior e.g., marriage, moving, annual tax refunds, etc., have been postponed due to the pandemic

Through the looking glass: Technology in a post-COVID-19 world

Technology has turbo-charged customer management capabilities resulting in the creation of entirely new business models across multiple areas such as e-commerce, ridesharing, over-the-top (OTT) media, fintech, ed-tech and hospitality.

Financial services and payments are witnessing a significant shift to digital modes of eCommerce, especially prepaid options offering ‘zero contact delivery’.

Supply disruptions are expected to change traditional repeat purchase behavior into increased adoption of predictable subscription services by customers.

Conversational assistants using natural language processing (NLP) and artificial intelligence (AI) have helped tackle overwhelmed customer support teams.

Companies are leveraging technologies such as augmented reality (AR), virtual reality (VR) and mixed reality (MR) to reimagine the customer journey and create a more real and personalized experience.

Innovative Creative

Shown below are examples of recent innovative creative being used by the insurance industry.

Fidelity Life

Focused on contactless coverage through RAPIDecision with no medical exam required.  The policy is a blended term life offering with approvals in 1-2 days.

Fidelity Life

Allstate Telematics

Allstate focused on a telematics product offering to capitalize on increased consumer interest driven from unprecedented reduction in driving miles.


Allstate Bundled Offering

Allstate debuted a new commercial highlighting bundled coverage across auto, home, life, identity and mobile phone. It’s an expansion of the traditional home and auto bundling that is typically seen.

Allstate Commercial

Farmers Insurance Policy Perks

Famers Insurance’s ‘Policy Perks’ commercials highlights benefits of policy tenure directed at increasing loyalty and retention.

Farmers commercial

What We See Working (and Why)

Listed below are some innovative marketing and product plays in the insurance industry that are getting our attention.

Insurer-OEM telematics connections

Consumer interest in telematics has been one of the major outcomes driven by changes in driving patterns caused by COVID-19.  Insurers are beginning to partner with manufacturers to make this connection even easier for the consumer. Leveraging partnerships with auto manufacturers and data exchanges can help to retain those customers looking to cut back on household expenses through innovative products like usage-based insurance. 

Ford has partnered with Metromile

“For us, Ford will help us rapidly evolve how we price insurance, measure real-time risk, and put drivers in control of an individualized pay per mile rate based on how and how much you drive,” Metromile CEO Dan Preston wrote. “Connected vehicles like Ford’s — packed with sensors and safety features — open up myriad opportunities for us to leapfrog ahead in each of these areas.”

Ford has partnered with State Farm

“We’re excited about State Farm’s approach of using Ford’s built-in connectivity to promote safer driving habits and enable opportunities for our mutual customers to save money. This agreement further builds on our strong relationship with State Farm to continue to deliver value for our mutual customers.” - Ford Enterprise Connectivity Executive Director Stuart Taylor

Verisk, CCC, and LexisNexis

Verisk, CCC, and LexisNexis provide data sharing capabilities for real-time telematics quoting by partnering with auto manufacturers. CCC’s offering, announced Aug. 11, teams its CCC X data exchange up with Volkswagen’s Car-Net connectivity and DriveView program. LexisNexis’ TelematicsOnDemand, announced July 24, leverages its LexisNexis Telematics Exchange, which currently receives information from General Motors, Nissan and Mitsubishi. Insurers participating in either exchange could review past data and immediately offer a quote. Telematics insurance startup Root is already confirmed to be using the LexisNexis option.

In conclusion, insurance brands need to actively address marketing efforts given the new environment to both overcome today’s challenges while also capitalizing on new opportunities. “Navigating the new normal” will require revised marketing guidelines for the end of 2020 and beyond.

Marketing Guidelines