Aggregators & Value Comparators Embrace or Avoid?
GLOBALLY INSURANCE AGGREGATORS HAVE ESTABLISHED THEMSELVES AS AN ALTERNATIVE DISTRIBUTION CHANNEL, ESPECIALLY FOR ANNUALLY RENEWAL PRODUCTS LIKE MOTOR. IN CERTAIN COUNTRIES, REGULATORY INITIATIVES ARE DRIVING LIFE INSURANCE AGGREGATION. WITH THE IMPENDING
With consumer demand for greater awareness and transparency in Insurance & Takaful, insurance aggregators have established significant presence in US, Europe, Australia and are growing in Asia Pacific (notably China and India). Consumers want trusted sources to compare before deciding to buy, and Insurers and Takaful operators are exploring how best to provide competitive product comparisons on their own or third party sites.
A key concern of the industry is whether aggregators will give a fair comparison or will they be primarily driven by profit. This article explores the potential and risks associated with using aggregators and value comparators as an alternative to setting up a direct online channel.
In a 2014 study on viability of insurance aggregators in Singapore, it felt that “the insurance aggregator is an inevitable development … Though triggered by local regulatory requirements for life insurance; the aggregator has an established presence in other parts of the world where financial advisory is at a mature stage.” 1 Over the past few years, a number of general and life aggregators have emerged in Singapore; some independent (http://www.clearlysurely.com/compare.html) and some regulatory driven (http:// www.comparefirst.sg/).
The trends in Singapore are relevant to Malaysia with the Bank Negara Life Insurance and Family Takaful Framework2 requirement for all Life Insurers and Takaful Operators to have an online direct channel by January 2017. One question comes to mind – should the Life and Takaful association form their own aggregator (e.g. similar to CompareFirst) or leave it to market driven channels as is
happening in other countries (e.g. Alibaba China)?
EVOLUTION OF AGGREGATORS
In the 2015 survey by Bain & Company3, globally 8% of life insurance and 10% of property and casualty is currently sold online and expected to grow to 15% (life) and 23% (P&C) over the next 3 – 5 years. The survey identified a number of potential benefits for insurers:
● 37% increase in digital customer service after digital purchases;
● 26% reduction in use of cortact centre;
● Reduced product development life cycle; and
● 20% increase in auto-underwriting and auto-adjudication.
The initial focus of aggregators was on simple financial products (e.g. loans, credit cards) which evolved into offering mandatory general insurance (e.g. motor, travel); and now offering simple Life & Family Takaful protection products (at times driven by regulatory initiatives).
Europe has rapidly embraced online insurance purchase4, with the UK becoming the leading market for aggregator and direct growth.
In their analysis “Evolution of Aggregators” 4, Accenture identified a number of trends why UK consumers were quick to adopt online insurance (both aggregator and direct):
● Well established direct channel with more than 40% private motor market share,
● Consumers are very sensative to price and view internet as a low cost channel,
● Cosumers are open to new insurance brands via corporate partners or ‘brandassurers’ (estimated 18% of private motor is distributed via non-financial services),
● Significant progress in website usability, safeguards for online security and mechanisms to collect electronic payments.
DataMonitor’s7 analysis of the UK broker market saw that the motor aggregator business plateaued at 56%, but the home insurance is expected to grow from 30% to 38% in 2015.
In Asia, the personal relationship is a factor that may slow adoption of online insurance and Takaful; as well as perceived lack of safeguards in collecting online payments. However, in other sectors e-commerce is well accepted. The EY “Asia Pacific Insurance Outlook 2014”8 saw Asia aggregator websites increase 44% and 50% for motor insurance and home insurance respectively, between July 2012 and April 2013.
ROLE OF AGGREGATORS & VALUE COMPARATORS
The role of the Insurance & Takaful Aggregator:
● Provide potential client with comparative insurance quotes based on price commoditised lines (e.g. motor, travel),
● Act as a referrer sending referral details to insurer and leaves insurer to contact and conclude the insurance sale,
● Aggregator is paid a referral fee for policies concluded,
● Insurers looking for significant increases in volume of business by providing “stripped down basic policies” to aggregators,
● Insurance Aggregators would not be the correct medium for very complex insurance products
● Support reulator initiatives introduce basic Life Insurance & Family Takaful aggregation
“Customers are gaining a better understanding of the advantages of direct insurance and will approach either the direct insurers or aggregators to find the desired insurance cover at the lowest price”
In summary, the aggregator focus is to provide consumers with the best value for money. However, that is provided that the consumers understand what they are buying. From recent analysis, 26% of consumers find it hard to know whether they are getting value for money6, for Life and Family Takaful the percentages will be much higher, especially when comparing conventional insurance against Takaful.
This opens opportunities for an alternative comparison model i.e. the Value Comparator.
The vision of the Value Comparator is to become an online one-stop Insurance & Takaful advisory, giving consumers advice on a range of insurance solutions, tailored to their personalised needs. Helping the customer choose products based
on value rather than price by listing based on how well products could meet customer needs.
The Value Comparator attempts to identify product options based on needs as well as personal details, and use common terminology and graphics to simplify benefit comparisons.
We believe that the Value Comparator has great potential to become popular to fill the gap as
many customers struggle to work out if an insurance/Takaful product is value for money. However a business model needs to evolve to ensure the Value Comparator can continue to provide impartial advice.
WHERE DO AGGREGATORS & VALUE COMPARATORS FIT IN THE BUYER JOURNEY?
Today users constantly switch between smartphone, tablet and PC screens when browsing on the Internet, buying online, managing finances and planning holidays. Thus, the aggregator and value comparator sites must be responsive mobile to cater for the consumers’ insurance and Takaful buying journey below.
Typically the Aggregator role in the buyer journey is Step 4 in providing price comparisons, often providing referral links to talk to intermediaries; whereas the Value Comparator plays a wider role from Step 2 through Step 6 by providing informative content that can be posted on social site linked to product comparisons and may include direct purchase within the site itself. However, with this wider role, Value Comparators have to continuously provide new content to maintain traffic, thus increasing their operating overheads.
Aggregators are targeting consumers who are willing and have the ability to initiate Insurance & Takaful purchase process online:
● Driven by a conscious or mandatory need for insurance and Takaful;
● Familiar with terminology, terms and conditions of what is being compared; and
● Looking for the best price and are are willing to spend time & effort to research.
Value Comparators are targeting digital savvy consumers who like to shop online but are unfamiliar with Insurance & Takaful, they seek out trusted advice before deciding to buy online:
● Driven by a conscious need for Insurance & Takaful;
● Unfamilliar wit terminology terms and conditions, but want to understand; and
● Looking for best value for money, spending time, effort to research and open to chatting online with experienced advisors.
AGGREGATOR & VALUE COMPARATOR PRODUCT SUITABILITY MATRIX
Unless you can commoditise Life Insurance & Family Takaful, it is unlikely that a sizable segment will purchase via aggregators – unless it is mandated by regulators or driven by events. This has been observed in markets where aggregators have a mature presence.
In Malaysia today, with personal relationship selling still high on the consumer’s thoughts, Life Insurance & Family Takaful products are “sold not bought”. Thus, currently life offerings on aggregators have been primarily constrained to simple term or mortgage insurance for simplicity and as complementary offerings such as home loans
Value Comparators on the other hand, although more ‘expensive’, provide the value added advisory required and thus, have the potential to offer Life Insurance & Family Takaful direct.
RISKS & BENEFITS OF AGGREGATORS & VALUE COMPARATORS
With the growth of aggregators and the emergence of value comparators elsewhere, there are significant concerns as to whether Aggregators & Value Comparators will complement or disrupt existing distribution channels.
The potential benefits are:
New sources of customers to cross-sell/upsell higher value products,
Greater Insurance & Takaful awareness in emerging markets,
Potential to improve SEO ratings through additional links to the corporate sites,
Shared costs as an alternative to offering direct online channels, and ● Value comparators have the potential to build greater awareness and trust
Which come with associated risks:
● Managing channel conflict with agents and brokers,
● Poor consumer awareness on how to compare products may limit aggregator traffic volume (especially for life and family Takaful),
● Aggreators emphasise on price comparison at expense of product benefits and service,
● Value comparators emphasise on product benefits and service but at higher prices,
● Blurring of "paid advertising" versus impartial “comparison” on aggregator and value comparator sites,
● Readiness of Insurers & Takaful Operators current online capabilities to support aggregator and direct online business
“In today’s market, increased use of the web – either direct or via comparison websites – is creating further difficulties for insurers, as online customers are more likely to churn”
Accenture4 highlights a number of challenges facing insurers in markets where aggregators are well established:
Insurance struggling with lower customer loyalty with 81% of UK online motor insurance customers planning to shop around at renewal;
Price sensitivity of aggregator customers;
Insurer dual pricing dominant aggregators increasingly control distribution of certain products, forcing insurers to compete hard to maintain market share;
Online channels reinforcing negative consumer perceptions
of value causing insurers to spend more to counter negative consumer perceptions of insurance, which for most people remains a ‘necessary evil’; and
● Target for fraudulent insurance activity need to verify authenticity and potential for anti-selection.
EMBRACE OR AVOID?
Insurers & Takaful Operators must be convinced on the value that the aggregator/value comparator brings in return for their participation and need to consider channel conflict issues, lost opportunities of not becoming early adopters against the costs of developing and growing their own direct channels.
For aggregators and value comparators to provide positive value to the Insurance and Takaful industry, it is necessary to build critical mass, with industry players’ active participation both as suppliers and advocates.
Compare your choices
Sample: Health (654); home (877); motor (1,424) N. B. figures do not add up to 100% due to rounding.