SOURCE: The Boston Consulting Group

The Boston Consulting Group

May 05, 2016 02:00 ET

Consumer Attitudes Point the Way as China's Insurance Market Matures

The Power in the Chinese Insurance Market Is Shifting to Consumers. To Win in This Hotly Contested Area, Providers Must Earn Customers' Trust and Become Better at Claims-Handling, a BCG Survey Suggests

HONG KONG, CHINA--(Marketwired - May 5, 2016) - Life and auto insurers in China will have to do a better job in some fundamental areas if they want to hold onto their share in the fast-changing Chinese insurance market, according to new research by The Boston Consulting Group (BCG). The research, described in "Listening to What Chinese Consumers Say About Insurers," an article that is being released today, uses consumers' recommendations and criticisms over a recent 12-month period to provide insights into the must-haves of insurance in China.

What determines whether Chinese consumers recommend an insurance brand is the trust they have in the provider and the simplicity of the provider's offerings, according to the BCG survey. The claims stage of insurance produces the most criticism, with half or more of those who have criticized an insurance brand saying they have done so because of a claims process that was too slow, not transparent enough, too time-consuming, or didn't leave them feeling adequately compensated. These are deficiencies that Chinese insurance companies should address.

The study, for which BCG's China Center for Customer Insight surveyed 3,200 Chinese consumers, captures the sentiment toward insurers at a time of rapid change. Chinese regulators are opening the market to competition and pushing for reforms that will benefit consumers. At the same time, new consumer technology, including mobile devices, is creating expectations for simpler, more transparent interactions with insurance providers. 

"The power in the Chinese insurance market is shifting to consumers," said Tjun Tang, a senior partner at BCG and a coauthor of the article. "To hold onto or improve their market positions, providers need to focus on the customer experience in a way that hasn't been necessary before. They also need to figure out how they can enhance their reputation for being trustworthy and for the simplicity of their services."

Middle-aged and older Chinese are among the least enthusiastic when it comes to insurance brands, especially when they feel they've gotten poor customer service.

More than three in five Chinese customers aged 46 to 55 who said something negative about their life-insurance provider in the period covered by the survey did so after a poor customer-service experience. No other factor accounted for anything close to that level of expressed dissatisfaction.

Another group not inclined to say a lot of good things about insurance brands are people who live in big cities. With respect to both life insurance and auto insurance, tier 1 city dwellers (those who live in the biggest cities, including Beijing and Shanghai) have relatively low advocacy scores compared with people in smaller tier 3, tier 4 and tier 5 cities.

Married couples with young children make up the group in China that tends to speak most favorably of insurance brands, the survey shows. People in this group own a lot of insurance and may believe in its benefits more fervently than those in other groups.

The following are among the survey's other findings:

  • Auto insurance gets high marks. One surprise of the survey was that auto insurers scored comparatively high advocacy scores versus life insurers. Auto insurance gets higher satisfaction scores than life insurance at most interaction stages in China -- including purchase, post-sales services, and claims.
  • Attitudes toward different types of insurance diverge over time. Satisfaction with auto insurers tends to increase with customer tenure in China, possibly because of tie-ins that limit car buyers' insurance options for the first year or two of ownership but leave them free after that to find insurers more to their liking. Exactly the opposite is true of life insurance customers: they tend to become less satisfied over time, probably because the number of interactions with life insurers goes down as customer tenure goes up. Higher levels of customer engagement would likely increase satisfaction scores for both types of insurers.
  • "Big" equals "trusted." Chinese consumers rate big insurance companies high on trustworthiness and simplicity. In some cases, however, big insurers are seen as having less attractive product offerings than small insurers, especially in cases where the small insurers' products are more flexible and more affordable.

Advice on What to Do

With the market in flux, Chinese insurance companies may be unsure of what steps to take first. Any changes that lead to a company's being perceived as more trustworthy or that enhance the simplicity and transparency of its product offerings, including taking advantage of new technologies, are unlikely to lead to regrets later on; companies should begin initiatives in those areas immediately. The same is true with what happens at the claims stage -- doing things now to increase customer satisfaction with the claims process can only help later on.

"Insurers have legitimate questions about the 'how' -- as in, 'How do we recreate ourselves for the future that's coming?'" said Michelle Hu, a principal at BCG and another coauthor of the article. "There is more clarity around the 'what.' Insurers don't have to guess what matters or to whom. Consumers are starting to communicate this pretty clearly."

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact BCG's Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries. For more information, please visit bcg.com.

About BCG's Center for Customer Insight
The Boston Consulting Group's Center for Customer Insight (CCI) applies a unique, integrated approach that combines quantitative and qualitative consumer research with a deep understanding of business strategy and competitive dynamics. The center works closely with BCG's various practices to translate its insights into actionable strategies that lead to tangible economic impact for our clients. In the course of its work, the center has amassed a rich set of proprietary data on consumers from around the world, in both emerging and developed markets. The CCI is sponsored by BCG's Marketing & Sales and Global Advantage practices. For more information, please visit http://www.bcg.com/expertise/institutes/center-customer-insight.

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Contact Information

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    Tel +1 617 850 3783
    Fax +1 617 850 3701
    gregoire.eric@bcg.com