A policyholder-first approach to the insurance experience

Taken together, we see how carriers view the path to growth: By being more efficient internally, driving down their costs and closing business and resolving claims quicker, they expect to be able to grow their books despite the macroeconomic challenges facing the sector. 

Understanding policyholder demographics

However, insurers should be cautioned that their addressable market of consumers — people buying insurance for themselves, their families and their businesses — are increasingly skeptical of the insurance industry after seasons of rate hikes and nonrenewals. In our research of policyholders, Celent finds that younger cohorts — the millennial and Gen Z consumers entering the insurance market for the long haul — aren’t seeing value from their insurance companies. They aren’t confident they understand the product they’re buying. And they aren’t loyal — they're more likely to switch.

As insurers look to drive internal efficiency with the goal of acquiring new customers, they should beware of these discouraging trends. Let’s start by taking a look at what the customer data tells us.

> Additional insights | Adapting to generational shifts in insurance

Do you have a relationship with your insurer?

In late 2024, Celent surveyed 300 small business owners about their attitudes toward purchasing insurance for their business. These buyers serve as a useful proxy for insurance buyers across lines of business: Many of them are the sole person responsible for the insurance purchase, similar to a head of a household.

We found that price was a primary driver of insurance buying behavior in this cohort — especially among the older cohort of buyers, in the baby-boom and Gen X generations. These buyers were also more likely to maintain a relationship with an insurance agent to buy their coverage. 

Insurers face a minor conundrum with the age of their policyholders. Older buyers represent a large portion of premium across business lines. It can be tempting to base assumptions about the state of the insurance business on them as a result. But it’s the younger customers who will be buying insurance not just now, but 10, 20 and 30 years from now.

The Gen Z and millennial component of our sample was more likely to buy insurance online than with an agent. And they were more likely to say they had switched or at least shopped for a new company in the past year.

Some of that might be explained by what’s revealed about the online insurance purchasing experience. People who bought online were more likely to report that they didn’t feel comfortable with the process, or felt they had a good understanding of the product they were buying. And perhaps paradoxically, they were also more likely to report that they wanted the process to take less time the next time they bought insurance. 

The online experience isn’t meeting expectations

It can't be doubted that even the most rudimentary online insurance experience is speedier and more efficient than an agent when it comes to the mechanics of collecting demographic information. Strides have been made in leveraging third-party data and prefill to minimize the amount of keying in a user has to do.

But in comparison to other online purchases, even complex ones such as airline tickets or even account setups for other financial institutions, an online buyer of insurance is still spending more time than they want to in the sales funnel. The variance in the insurance experience — and the number of factors that can cause an application to pop out of straight-through processing — means that while it may be faster than going to an agent, it’s still not meeting the standard they expect for buying online.

In some ways, insurance has been its own worst enemy on this front. For example, auto insurance companies have competed for more than a decade by promising fast setup when switching from previous carriers. Other lines of insurance may not promise that, but they are being judged against the one that is by far the easiest to commodify.

At the same time, the assumption that a buyer not wanting to visit an agent’s office means they don’t want some of the value that’s been provided by agents forever — contextualizing the insurance company’s asks, guiding them through the process, explaining the meaning of coverages in plain language — has clearly been a miss. Through the early part of the Insurtech wave, we heard a lot about agents being disintermediated by the internet. But agents are more than just stenographers. So shouldn’t our online processes be more than just forms to fill out?

And of course, you don’t have to be a subprime driver to have some factor about yourself that makes even the auto insurance process drag on a bit. Despite a push toward straight-through processing of as many policies and claims as possible, exceptions that lead to “pop-outs” are common. Efficiency can’t be dependent on a perfect customer. Insurance companies must be able to deliver a rapid, but reassuring, experience to a wide range of customers. 

How to improve the online experience

To build a sustainable digital experience for insurance customers, there are some steps carriers should take today:

Audit your existing processes

Look at the flow of your online tasks from the customer’s point of view, including onboarding, service and claim reporting. Are there places where users fall off and reach out to the call center? (Or worse, abandon their task entirely.) Are you providing that peace of mind and guidance at those choke points? Most importantly, is everything fully functional?

Bring the peace of mind and guidance that agents provide to the digital experience

The easiest way to do this is to have online chat capabilities. But, since that still requires staffing a call center, consider the conversational abilities of generative AI in being able to answer some common questions. A well-appointed chatbot should barely be noticeable as one. There’s a lot of headroom in insurance when it comes to the online experience. Your AI chatbot doesn’t have to know everything. It simply has to outpace a Google search in another tab or the frustrating IVR menus and wait times of a call center to answer most questions that make customers uneasy.

> Additional insights | Explore the power of AI agents

Digitize the agent and broker channel

Some of the most complex lines aren’t going to be able to work in self-service mode. Yet, many agents and brokers are still conducting business by picking up a phone to call an underwriter. The same efficiency gains that customers seek are also useful in the insurance agency workplace. Leveraging third-party data and prefill, as well as a chatbot that can answer common agent questions, can improve the agency experience and revolutionize the role of these crucial players in the insurance ecosystem.

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About the author

Nathan Golia is a senior analyst in Celent’s North American property and casualty insurance practice. Before joining Celent, Nate worked as a trade journalist exclusively focused on digital transformation in the insurance industry for 13 years. As an analyst, Nate’s goal is to help insurance companies identify winning paths for acquiring and retaining policyholders by leveraging data and digital across the value chain. In addition to his brand’s conferences, Nate has spoken at a wide range of insurance events, including Insurtech Connect, IASA, AHOU and Insurtech Hartford. He also has moderated and appeared in many web seminars and other online events.