Opinion: How has online buying affected insurance?

The insurance industry is betting Generation Z will be the driving force behind the purchase of insurance policies online.

Gen Z — those born between the last 1990s to the early 2010s — is coming of age in a world of online streaming, digital shopping and pay-for-use services. They have grown up cradling a smartphone and have never known a time without the Internet and social media.

A 2017 study by the Institute for Business value found that:

• 74 percent of Gen Z spends most of their free time online.
• 75 percent of Gen Z consumers use mobile phones and smartphones the most compared to other devices.
• 60 percent of Gen Z won’t use an app or website that loads slowly.
• 20 percent of Gen Z is willing to share public reviews online for things like restaurants and products.
• 25 percent of Gen Z consumers spend more than five hours a day on their mobile phones.

These self-reliant “digital natives” socialize, learn and have fun living in a fluid digital world. And, they’re thrifty. As such, products are being ‘commoditized’ thanks to digital solutions supporting quick compare, select and purchase capabilities. And that includes insurance.

Online purchases depend on brand familiarity, refundability and product knowledge. Markets must see goods as interchangeable with no difference to classify them as commodities. With trends pointing towards the growth of online insurance purchases, Canadian Underwriter asked the question in a recent editorial: Is insurance an online commodity?

Brand familiarity

The inclination to purchase online increases if consumers previously purchased or interacted with the brand.

Gen Z insurance clients are often buying insurance for the first time. They won’t have the experience or familiarity to trust the product they purchase is right for them. The recommendations of a friend or a family member will help. However, these suggestions may not consider different backgrounds (socio and cultural tolerance), assets, and liabilities considerations.

As a result, this inexperience calls for professional advice to supplement digital marketing or product education tools.

Refundability

When one purchases online, buyers are unable to experience the product beforehand. Online purchasers want simple returns if expectations aren’t met. When penalties for returning a product are removed, consumers are more likely to purchase.

Insurance is intangible and contractual, the editorial says. Penalty-free refunds are normally unavailable and most markets practice front-loading policy fees into cancellations.

Product knowledge

People with a full understanding of a product’s value will buy those products online confidently. But insurance is often complex and customized to an individual consumer’s needs.

Insurers use different strategies to protect clients from diverse events. Average consumers do not fully understand their risks, assets, liabilities and ability to self-insure.

Understanding their coverage needs and the implications of different policy limits, exclusions and options to confirm they’re buying optimal protection is difficult. Usually, brokers liaise between insurance carriers and clients, properly assessing the client’s risk tolerance and helping them select the best options.

Consider deductibles and limits as an example. Consumers, looking to save on premiums, may not understand the impact of options on their financial security during a loss. Digital options often don’t replace the value of broker support, the editorial says.

The digital advantage

Digital does offer distinct advantages. Customers from all generations use online tools to research insurance information. Research group LIMRA found 61 per cent of boomers, 58 per cent of millennials and 54 per cent of Gen X participants make insurance purchasing decisions using online research regardless of how they buy their final policy (online, call center or broker).

Digital online aggregators help consumers with brand and product decisions by providing research and comparison options before speaking to brokers. Online packages offering straightforward products to specific audiences are effectively sold online. For example, AppleCare offers product insurance to a specific need easily defined.

Additionally, online packages are effective when client needs are easily identifiable. Consider professional errors and omissions or pet insurance. Marketing can easily identify and qualify members who can then enroll online easily.

According to Canadian Underwriter, the online questions become: Can we identify and match consumer needs and product options? Can we instill confidence in online consumers that their financial future is secure with their selections?

Canadian Underwriter plans to explore those answers in Part 2 of their opinion piece. Stay tuned.

In the meantime, if you plan to purchase insurance online remember that there’s usually an option to talk to a broker if you’re uncomfortable making selections to ensure you’re properly covered.

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