As the insurance industry is constantly evolving to meet the requirements of customers and combat new challenges, it is critical for insurance carriers and organizations to keep up with the latest market trends. There are multiple drivers that are fundamentally changing the foundations of this space. Insurance market research enables small independent agencies as well as national insurance providers to concentrate on strategic issues and come up with solutions apt for the insurance ecosystem. Insurance market research gives the liberty to gather the right balance of general impressions and detailed facts and enables insurance clients to analyze facts and data as per their needs.
The major types of insurance are life insurance, property and casualty insurance, and health and medical insurance. The global insurance market increased from $5946.74 Bn in 2022 to $6466.23 Bn in 2023 at an impressive compound annual growth rate of 8.7%. It is projected to increase by $1429.64 Bn during 2022-2027, accelerating at a CAGR of 4.5% during the period.
Informed decision-making with quality market research
Market research provides a wide range of tailored services for the insurance industry. Some of the factors that need to be delved deeper into include factor analysis, perceptual mapping, price elasticity, and more.
Thanks to technological advancements such as artificial intelligence (AI) and cloud computing that has led to improved efficiencies, automation, and lower expenses. Quality market research helps insurance companies to make informed decisions to cater to the ever-growing public demands.
Why do insurers need to conduct market research?
Without solid research about behavioral economics, marketing, and psychology of insurance products, the failure of insurers is inevitable. Insurers should create innovative services and products as well as enhance customer connectivity in order to sustain profitable growth. Case in point, the typical insurance industry loses 10-15% of its customer base each year and the cost of acquiring new customers makes this a costly experience. As per Harvard Business School, 95% of the 30,000 new products launched into the general marketplace every year fail. Insurers are better placed when compared to other industries when it comes to innovation and introducing new products. Researching customer needs and expectations in order to understand your business better is extremely important.
Market research provides valuable insight into the requirements of your consumer and can eradicate misperceptions related to what potential customers would think about your new launch. The best part about market research in insurance is that it can help you define your target audience and avoid costly mistakes. Market research not only helps mitigate risks, but it can also speed up product development time.
As per a report, insurance businesses are expected to invest up to US $56.97 billion by the end of 2022. The use of data leads to 30% better access to insurance services, 40-70% cost reductions, and 60% higher fraud detection fees.
What are the challenges of the Insurance Industry?
The data on insurers has enabled people to find the best product commensurate with their needs. The easy access to data has increased the bar for insurers. To remain competitive in the market, insurance organizations need to be better prepared to cater to the requirements of their customers along with mitigating the insurance risk. Insurers are leveraging the combination of machine learning and technological solutions to detect fraudulent activities.
Data-driven insights can lead to improved profits and understanding of customers. Data analytics can help in the generation of the risk profile of current customers. This enables organizations to determine who to upsell and cross-sell the allied products, thereby leading to increasing the customer lifetime value of current policyholders.
What types of market research generally fit insurers?
The insurance sector has been facing various challenges over the past many years such as low-interest rates, rising customer expectations, and shifting demographics. This has obviously led to decreased profitability, high competition, and many other struggles. To gain comprehensive insights into the US insurance sector, organizations need to conduct in-depth primary and secondary market research. The major requirements of market research include product development, pricing, branding, and product communication.
Insurers should use primary and secondary research to gather information for markets, products, and consumers. Secondary research is usually conducted in the beginning and by combining various sources of secondary data, you can track trends and get access to useful information at a low cost. You can then use the information to better understand the actions you and others have taken and learned from the mistakes and successes. Secondary research helps optimize future primary research, which is the collection of new data on a particular topic. Even though secondary research holds value in insurance, it lacks personalization and also the specificity required to track larger insurance innovation projects.
When should insurers invest in primary research?
Primary research helps in making informed business decisions. It begins with a review of secondary research in order to gain direction and insight into the intended study topic. Once the same is done, quantitative and/or qualitative methodologies are used to gain insight into customer requirements, preferences, and behavior. Other important advantages of engaging clients in a particular research project include solidifying relationships, strengthening loyalty, and creating new business opportunities. Surveys are generally conducted to gather data about customers which provide a better insight into the customer base. An organization can also run statistical significance tests to apply results to the target audience and present the results graphically. Data-driven charts and graphs are a great way to enable stakeholders to understand the research and even help them act on the results.
As per experts, qualitative research is the best approach if one requires more context related to a dataset. The methodologies enable more in-depth understanding via direct quotes from respondents and the capability to contextualize answers to understand a specific answer to gain deeper insights. Case in point, qualitative research is more time-consuming and expensive when compared to quantitative research.
How does primary research help in insurance innovation?
Both types of primary research methods are important in providing insights into the market.
For instance, quantitative surveys are questionnaires that are developed for a particular study topic and distributed to respondents based on various criteria. Surveys provide a comprehensive view of the market owing to its large sample size.
On the other hand, qualitative interviews and focus groups offer context by allowing participants the opportunity to expand on why they have various beliefs and opinions and the way they feel about a particular topic. Respondents who fit some criteria undergo in-depth one-on-one interviews which are very important.
Focus groups are somewhat moderated discussions of opinions about a particular topic or product. The moderator provides the structure, asks the questions to participants, and directs the discussion.
Case studies related to how research can help insurers
Various insurance companies have been benefiting from market research.
- Company Name: AXA
Challenge: Aim to engage with customers throughout their journey and place them in a way that resonates with customers across all generations
Solution: By leveraging Digimind Social which is a social media listening tool, the company is able to produce monthly reports and audits on a share of voice, brand sentiment, and brand equity in a seamless manner. This provides better insights into the company to the stakeholders thereby aiding quicker and more informed decision-making.
- Company Name: Zurich Insurance
Challenge: In another instance, Zurich Insurance wanted to track and manage client satisfaction with its commercial lines claim service that consists of general liability, worker’s compensation, property, and commercial auto claims.
Solution: A market research company conducted telephone surveys to track the satisfaction of customers. This apart, they dug deeper into claims operation at the insurance decision-maker level. By applying the same, Zurich Insurance managed to curb its number of dissatisfied customers by a significant percentage.
To conclude, a unique combination of quantitative and qualitative research methodologies makes product development processes better. It even validates innovative ideas and new launches. For acting on the insights, you should have the infrastructure and resources in place. There are various downsides to innovation as well, for example, administrative processes can slow down your company’s product development process. There are also concerns related to distribution issues and low-interest rates. But if you want to move ahead with innovation, you must ensure all the resources are in place to facilitate in-depth market research. Surveys and discussions also help you understand what your target audience is thinking about the innovation and how they would likely respond. Try to test multiple variations of your solution with your target customers to make sure you are on the right track.
Based on insights by Chahat Khatter, Manager, Research and Information, BFSI.