Are insurers starting cost competition?

Transparency is the buzzword in the financial industry. Everyone is talking about it – and there is a new approach: Allianz and Volkswohlbund stir up the German insurance industry with their approach. Since the beginning of the year, the two insurers have been reporting actual costs and returns for new contracts in the life insurance sector. The increased cost transparency in the course of the disclosure obligation has now found new pioneers. What does this mean for the industry? The global strategy consultancy Simon-Kucher & Partners determined in a short study among managers of the insurance industry what consequences the insurers draw from this and what concrete measures they are now taking.

“It is clear that the industry cannot ignore this signal,” explains Dirk Schmidt-Gallas, partner at Simon-Kucher. According to the study, 70 percent of those surveyed are convinced that insurers will endeavor to be more transparent in the future. In Schmidt-Gallas’ conviction, however, it remains questionable to what extent a uniform industry standard can be implemented. And without a standard there will still be no real comparability. In spite of everything, over half of the respondents expected increasing cost competition. Almost 70 percent therefore planned to strengthen sales through values. “The commitment to selling in value is now exactly the right reaction,” says Verena Beeck, Senior Director at Simon-Kucher and head of studies. When it comes to implementation, however, the wheat will be separated from the chaff.

In practice, the new situation places new demands on sales, as the study further explains: Over half of the study participants expect the sales model to be repositioned. Accordingly, in future sales will not primarily have to sell via the product itself, but increasingly via its own advice and services. The majority of insurers have already recognized this market development and initiated the first measures. The insurers wanted to defend themselves against the pure comparison of costs. The customer benefit of the product should be placed at the center of the sales process and communicated more clearly (73 percent). Schmidt-Gallas sees this as a good sign: “A powerful argument about values ​​is always the better way, especially if you are in the middle of the range in terms of costs.” More than two thirds of the plan therefore plan to support sales in a targeted manner and convey values ​​even better Respondents. Insurers are thinking of giving their employees more support with optimized advisory approaches and sales aids as well as better training.

When implementing the “good intentions”, the study authors recommend the following action plan: Align products to customer needs: Build product structures and content with clear market knowledge of buying behavior and product preferences that create real customer benefits. Support valuable sales: develop convincing sales arguments and set up sales processes that support the consultant and customer in identifying needs and selecting products, thus making the process noticeably easier. Establish sales control that rewards value enforcement: Design remuneration and evaluation systems in such a way that in the end it actually pays off for the consultant to actually implement value orientation.

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