Lessons learned from online insurance labels in The Netherlands
In The Netherlands, more than half of all new insurance in 2013 was sold online. A large part is sold through new direct labels that are part of the traditional insurers. This article looks at the rise of these labels, their results and what can be learned from them.
Like many other countries in Europe, P&C insurers in the Netherlands were hit by the economic crisis, which lead to a decrease in consumer spending. Life insurers were even more under pressure, due to increased competition from banks, low interest rates and government imposed restrictions on fiscal benefits for their products.
Government imposed legislation has also put the intermediary channel under pressure. Following the example of Australia, Canada and England, a commission ban was introduced in January 2013 that prohibits any form of reward from the insurer to the intermediary for sold complex products (such as life insurance, investments, mortgages, and bank savings). Combined with stricter competency requirements, this legislation has led to higher costs for the intermediary. The number of intermediary agents had already been dropping rapidly the last few years.
A development also overshadowing the industry is the decreasing image of the insurer. The number of consumers that have a positive image regarding insurers has dropped from 80% in 2004 to 51% in 2013. The decline is a result of increasing premiums, lack of transparency and the profiteering policy (woekerpolis') affair, which holds insurers responsible for the misselling of investment-based saving products in the 90s in which large chunks of the premium were spent on costs.
The legislative implications and increasing pressure on costs had almost all insurers turn their eyes to direct distribution models. Since The Netherlands has high penetration levels for both internet and smartphone/tablet usage, digital was the way to go. However, the decision of insurers to offer insurance directly did lead to resistance from the intermediary channel. This can be seen as the reason for the insurers to use new labels in their strategy of entering the online market.
Introduction of new Online labels
Since Fortis (now a.s.r.) launched its direct and online label Ditzo in 2007, we have seen other traditional insurers follow. Allianz brought its online car insurer AllSecur to the Dutch market in 2009, while REAAL launched P&C label Zelf that same year. A year later Achmea launched InShared and the most recent addition was the first Facebook insurer Kroodle from AEGON last year.
These labels characterize themselves as online-only, direct and single-channel. They have developed new products and new back-office systems, resulting in ways to underwrite a product in just a few clicks.
The common denominator with these new labels is that they break with more traditional insurance conventions. The insurers are known to allow daily cancellation, as opposed to tacit renewal, and they seem to reward good behavior, instead of punish the bad. Both InShared and Kroodle pay back part of the premium to the customer, if the total of annual claims turn out to be cheaper. The labels also serve more as network organizations, outsourcing large chunks to (damage) partners, while keeping the number of internal FTE to a minimum. Lastly, their products have been made simpler and paperless, with clear conditions and clear communication through strong copywriting.
Overview of the labels
Ditzo (part of a.s.r.)
The first traditional insurer to start a new direct and online label was Fortis (now state owned insurer a.s.r.). Their label Ditzo was launched in 2007, only offering car insurance at the beginning. Ditzo started of rebelling against (the image of) the current industry in their communication outings and that strategy paid off. In a recent NPS survey they scored +28, against a -33 for parent company a.s.r.Ditzo now offers a full range of p&c products and health insurance and has lost its rebelling image: This has changed into accessible. We still want to challenge, but we're not going to kick anymore'.
InShared (part of Achmea)
InShared started in 2010 and offers all forms of property & casualty insurance. The company has around 15 FTE and a cost/income ratio of just 20%. They pay back a bonus to customers if total paid damages are lower than the total premium in a year. InShared serves 214,000 customers and sells 25% of new insurances through the mobile website, which increases with about 2% each month. On their website, an automated agent called Fleur' is able to answer 90% of customer queries, which resulted in higher customer satisfaction than with call, and significantly lower costs.
AllSecur (part of Allianz)
The car insurer AllSecur was launched in the Netherlands in 2009. While they are certainly not a discounter, they were the fastest growing car insurer in 2012 and turned profitable within 5 years. Because of their easy communication and clear conditions, AllSecur generates a top 5 position with comparison websites in almost 70% of all cases.
Zelf (part of REAAL)
Zelf is the direct label of REAAL, which started out as Zelf.nl in 2009. They generated around 60,000 customers in their first three years on the market, but did so with hardly any expensive marketing. Zelf intelligently matched their back-office with their front with Slim Schade Regelen' (Smart Claim Settling), which decides per claim what documentation is necessary.
Kroodle (part of AEGON)
The latest addition is Kroodle from AEGON. The self-proclaimed first Facebook insurer lets you take out insurance with the registration details of your social media account. This is not only used to make underwriting faster, but the social component is also said to keep claims lower since these are shared with the social network of the user. Kroodle works with a responsive, mobile first-website, which lets you do all insurance related transactions within a minute.
Continue to the full article to read about their results, lessons learned and what the future might hold here.