Car insurance prices are on the rise, but why? Robert McEvoy, Head of Allianz Ireland’s Direct business provides his insight on increasing insurance premiums and why the relationship between insurers and their customers needs to be repaired.
With the close of the first half of 2015 it appears that car insurance customers have been roused into action! So far this year in Allianz Direct we’ve experienced a surge in customer contact both over the phone and via Allianz.ie, with many consumers shopping around for a more competitive quote than their present insurer.
So what’s caused this? The first major reason has been well publicised. Insurance premiums have been subject to many years of under-pricing in the Republic of Ireland and this is the reason why many motor insurers in Ireland have reported losses on their motor insurance businesses in 2014.
Ireland’s return to economic growth and a greater number of road users has also increased the number of claims in the motor insurance market over the last 18 months and this has further compounded any loss-making situations some insurers have found themselves in.
Another factor relates to the Irish insurance industry’s preparation for the introduction of the EU led “Solvency II” directive in 2016; which means in broad terms that insurance companies must hold greater amounts of capital to cover their claims. Motor Insurance requires more capital to underwrite business than other insurance products (such as household for example) and therefore insurance companies have had to adjust their pricing in advance of these new minimum solvency requirements from next year.
The above factors are why customers across the Irish market have seen an increase in their motor insurance premiums this year. The knock-on effect of all this has also been clear; customers are being asked to pay more for their motor insurance and are actively shopping around seeking more competitive insurance prices.
And so they should.
For many years, and particularly since the economic downturn, the relationship between customers and their insurance company has, in my view, been broken. Trust is at an all-time low, and much of this can be attributed to both parties treating the insurance products they either sell or buy as a simple commodity; where price is the ONLY important determining factor of choice.
But let’s exclude price for one moment. The single most important truth of insurance is that customers want to be looked after when they run into problems – it is after all the reason why people buy insurance in the first place.
When a person’s car is damaged, when their home is broken into, when their pet is in pain and needs urgent veterinary care they want to know they can rely on their insurance company to step in and help in these types of situations. Can you rely on your insurance company to help you during these times? Do you have any evidence that the guys who provided you with that cheap-as-chips ‘comprehensive’ motor policy for just €200 are really going to come up trumps when things go bad?
This is a two-way street, however; and a mind-set shift by insurers is also required. The Irish insurance market is no longer one dominated by insurance advisors such as brokers, banks and building societies. Over 50% of the Irish private motor insurance is now estimated to be provided directly by insurance companies where no intermediary is involved. Therefore, insurance companies need to finally realise and appreciate that their role must change in light of this.
Insurers must start making themselves useful in their customer’s lives, not simply operating as identical, emotionless ‘service suppliers’ who are up for a haggle at renewal time. We must adapt and develop our knowledge and skills to understand what customers actually want and how we can be better when delivering service, building trust, and engaging with our customers.
At Allianz, we’re working really hard to ensure that we operate as efficiently as we can, and where possible pass on savings to our customers in the form of lower premiums. However, we have deliberately steered clear of the ‘match or beat your renewal premium’ tactics undertaken by a number of our competitors in recent years. Instead we are concentrating on providing four fundamentals to our customers:
- Great quality insurance
- Reasonable pricing
- Market-leading customer service experiences*
- A claims service built with the customer in mind
This focus on quality and treating people fairly when they need us most has allowed us to remain competitive in price terms over the last number of years. As a global brand, and one which was named the “most valuable insurance brand in the world” in 2014 by Brand Finance, we have a responsibility to protect our reputation in this space. The most important thing we can do here is to continue to act with integrity in our dealings with customers.
At the moment it’s unclear whether motor insurance premiums will continue to increase across the market over the next 12 months, but irrespective of this I believe that Allianz’ customer-first approach will allow us to deliver innovative and transformative services that our customers genuinely want and value.
Recently we have invested in and launched an online self-service platform called My Allianz which will help our customers take greater control over their insurance policies. We have some exciting things planned in this space over the next couple of years and in combination with our existing emphasis on quality and service we are really serious about rebuilding trust with insurance customers across Ireland. We look forward to the opportunity of helping you and your family during the good times and the bad.
*Allianz Direct business has once again been independently benchmarked against its main competitors as the best insurance provider in Ireland for sales and customer service in Motor and Home Insurancein June 2015. This mystery shopping exercise was carried out by Pan Research during May 2015.
Information correct as of September 2015