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Social Media Creates New Opportunities For Insurers, According To A New Study By The Boston Consulting Group
Published Jul 6, 2011
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Social media represent an enormous opportunity for insurers that have the vision and drive to make the global explosion in social networking—through such sites as Facebook, Twitter, LinkedIn, and others—work to their advantage, according to recent research conducted by The Boston Consulting Group (BCG).
In light of the soaring popularity of social media among virtually all age groups, BCG recently carried out a global study of such media as they relate to the insurance industry. The study included a consumer survey aimed at assessing the role of these channels in the insurance purchase process. The survey also sought to gauge how social media influence interactions among insurers, agents, and consumers, and how these new networks affect customer satisfaction. The results were eye opening for the industry. Some key insights:
• 47 percent of consumers who use social media do so in order to obtain the opinion of friends and peers
• 64 percent of consumers who pick an insurer based on friends’ advice are satisfied with their choice, compared with 56 percent of those who do not rely on their friends
• 14 percent of consumers are connected to their insurance agents via Facebook, Twitter, or LinkedIn, and 25 percent of these consumers are connected to their agents on two or more social networks
Dr. Sven-Olaf Vathje, Partner and Managing Director of The Boston Consulting Group in Abu Dhabi commented: “The bottom line is that social media are proving to be a highly beneficial channel for insurers. They foster referrals in a business that has always depended on referrals. Moreover, consumers are beginning to connect with their insurers and agents through social networks. And when they do, they show a broad increase in satisfaction, willingness to purchase, and willingness to refer their agent to friends. Clearly, this type of connection is still in its early stages. The fact that just 14 percent of surveyed consumers are linked to their agents online shows the vast potential yet to be realized.”
The global reach of social media, by any standard, is a truly astonishing phenomenon. In some developed economies, up to 80 percent of PC users are members of social networks, and they are connected to these networks nearly 25 percent of their total time online.
Likewise, social media use is still growing at staggering rates in the GCC. It is estimated that in 2011, there are more than 7 million Facebook users in the GCC – all of them potential insurance clients. However, this potential for insurers remains largely untapped to date.
"Although online sales are gaining importance for 'simple' insurance products such as car or home insurance, they are rarely supported by an approach for interacting with existing and potential customers through social media", says Dr. Christiane Mueck, a Project Leader with BCG in Dubai. Dr. Vathje adds: "Most Middle Eastern insurers use their web page for product information only. They are not yet present in the social media space."
BCG asserts that the first step for insurers wishing to embark on a social-media initiative is to be clear about their objectives and to decide how the effort will fit in with their overall marketing priorities and distribution strategy.
Overall, the opportunity for insurers is essentially threefold. Through the careful, strategic use of social media, insurers can capture innovative ways to engage their customer base, enable their agents, and enhance their wholesale distribution.
Engage Your Customer Base
The key is to move from building a basic presence on social media to enabling rapid and easy communication not only between consumers and the company, but also among consumers themselves. "Also in the Middle East, customers are already creating profiles and commenting about their insurance companies today," Mueck says. "Companies will need to support and encourage these dialogues and consciously integrate them into their marketing and sales efforts. In a way the customers are already paving the way, but it will take a considerable effort for the insurer to link its own social media activities to the existing content."
As social media tend to have a long memory, insurers need to have a clear handle on who within the project team can respond to queries and complaints—and what can be said. The company’s responses must be clearly written, consistent, and understanding in tone.
Any insurer trying to establish a presence in social media also needs to consider a fundamental question: What do we do when consumers post negative comments about us? To be sure, some carriers are trying to avoid exposure to negative commentary altogether by opting out of a presence in social media. Yet consumer behavior in other industries suggests that this approach is relatively ineffective. Negative feedback about companies will happen on social media—the choice is whether or not to play an active role in dealing with it.
The ultimate goal needs to be to create consumer advocates on behalf of the company.
Enable Your Agents
Insurers with tied agents, but also those with a salaried sales force have an unprecedented opportunity to multiply their social-networking presence by helping their own agents to use social-media platforms.
There are two principal opportunities. First, agents can broaden and enrich their customer acquisition processes, using social-networking sites both to identify new prospects and to obtain valuable information about them. Second, agents can use social networking to create and deepen customer relationships at relatively little effort and cost. Both opportunities constitute significant cultural changes in the modus operandi for agents, moving from a restricted or prohibited use of social media to its use as a prominent tool in the sales and customer relationship process.
Although this type of marketing is in its initial stages—many insurers still have no agent representation in social media—one thing is clear: the presence of agents on these sites will ultimately become a core element of the sales force of the future. It will be hardwired into the business. "At this point in time, a well-crafted social media strategy for the agent network can represent a competitive advantage", says Vathje. "And the commercial benefits for the early movers are likely to multiply in the years to come."
The BCG research shows that when customers connect to their agents through social media, they tend to perceive a higher level of overall product and service satisfaction. They also tend to have higher levels of trust in the insurer and consequently refer friends more often. What is even more important, such customers become more fruitful cross-selling targets. Insurers and their agents must find the right tools and strategies to make the most of this vast opportunity.
Enhance Your Wholesale Distribution
For insurers with independent distribution (like broker distribution in the Middle East), there is a significant opportunity to broaden their wholesale presence through social-media channels. More and more professional communities will form, and new opportunities will arise to identify both networks and influencers—and to proactively engage the independent-agent and broker community. Although such an initiative should be perceived as a long-term project, insurers should be thinking now about how to approach it.
Ultimately, the question for major insurers should not be whether they can afford to make the investment required to seize the opportunity that social networks present. It should be whether they can afford not to. "Only 10 years ago many insurers pondered if they really needed to communicate with their clients via email and webpage – a no brainer today", Mueck reminds.
The rise of social media is of similar importance for insurers, according to Vathje. He concludes: “In some Middle Eastern countries, social media are trusted more these days than any other form of information. Every insurer will need a clear strategy, well-defined processes, and strong governance to make the most of the social media opportunity. But time is of the essence. Insurers that do not act, or that act slowly, may find their new business growth moving at a sluggish pace while early movers—those that make detailed plans to capture the benefits of social media—forge ahead rapidly”.
For more information:
Website: www.bcg.com
Posted by
VMD - [Virtual Marketing Department]
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