Almost half (49 per cent) of the UAE’s general insurance customers prefer buying multiple products from one provider, indicating the potential for sector growth through cross selling, a report said.

Service quality, product flexibility and loyalty rewards are key to growth for UAE insurers, added the Global Insurance Consumer Survey 2012 conducted by Ernst & Young, a global leader in advisory services, in association with Ipsos, a major market research company.

“UAE customers are willing to buy more but they expect insurers to make it easy for them. The process has to be convenient, providing an opportunity for multiple buying at the time of original purchase and via the channel of their choosing. Products need to be simple so that it is easy for customers to understand what they are buying, and customers increasingly expect to be rewarded for loyalty,” said Justin Balcombe, Mena Insurance Sector Leader, Ernst & Young.

“Customers will expect a discount for holding more than one product, so insurers need to develop a pricing model that allows this,” he added.

The importance of pricing

Received wisdom is that property and casualty products are often commoditized and price, therefore, is the only criterion on which they are purchased. Fifty-eight per cent of respondents say they take price into consideration ahead of a well known or trustworthy brand and customer service.

For the customer, the importance of pricing largely depends on the type of insurance being purchased. For those buying directly from an insurer, price is selected as the most important factor, however for bank customers; financial stability is the most important factor. Across all channels for motor and home insurance, price is overwhelmingly the key driver, according to the report.

For renewals, non-price factors, such as service and trust, are most important to loyal customers, with price being identified as a key factor by only 25 per cent of respondents.

“Price is an important component of value, but it is not the only one. Our research indicates that purchase drivers are specific to product and channel,” said Balcombe.

Reasons for switching

Insurers may not be not keeping up with customer loyalty trends, as UAE customers are increasingly accustomed to rewards for loyalty, said the report.

Eighteen per cent of UAE consumers of life and savings products have already switched providers in the last five years – the highest among all countries in the global survey. The high level of switching in the UAE is likely to be driven by changes to employment status together with the transient nature of the population.

The survey showed that over a third of switchers moved due to the provider’s inability to adapt to their needs, which suggests a lack of flexibility on the part of insurers. Poor service was the next most cited reason for changing.

Thirty-seven per cent of the UAE respondents said that they are very or fairly likely to change provider in the next five years, as compared to only 15 per cent in the Americas and 16 per cent in Europe.

“Though providers may feel they have little ability to make a difference to customer retention, 51 per cent of switchers would have considered staying if their provider had proposed an improved financial offer. Insurers in the UAE should focus on service quality, product flexibility and loyalty rewards,” added Balcombe.

Repeat purchases

Convenience and service are the main factors driving repeat purchases. Customers cite simplicity (72 per cent) and the expectation of better service (47 per cent) as major reasons for preferring a single provider.

Comparing UAE results to other regions, it is clear that improved quality and frequency of contact, as well as satisfaction with the provider, drive repeat purchases. Incentives or rewards for loyalty can also influence this.

“Insurers need to ask how they can demonstrate that a repeat purchase is either easier or better value than going to another insurer. Processes for repeat sales need to leverage the insurers’ existing data, to shorten the sale time and tailor the product. Insurers who ask questions to which they already know the answers will lose their goodwill advantage,” added Balcombe.

Implications for insurers

The research shows that across nearly all countries, most switchers heard very little or nothing from their insurers. This is also the case in the UAE — 46 per cent of those who changed non-life insurance providers feel that their former insurer did not make any effort to prevent them from switching. For life insurance providers, only 31 per cent of customers said insurers had made fair or great efforts to retain them.

“Having an effective customer retention function is becoming essential for insurers. Repeat sales can be achieved but insurers need to improve and leverage their client data using CRM systems. Personal interaction in the sales process remains very important.

Client contact methods need to improve to meet both servicing and retention objectives so personal interaction needs to be in place across all distribution channels,” concluded Justin. – TradeArabia News Service